Will Apple Pay and Its Backers Ignite Mobile Wallets? (Sept. 11, 2014)
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Numerous payments providers, financial institutions and merchants have thrown their support behind Apple Inc.’s new Apple Pay service—and if the tidal wave of early backing is any indication, the Apple and iPhone brands already may have overcome one of the most vexing issues hindering mobile wallet adoption—lack of widespread support by stakeholders in the value chain.
Featured on the soon-to-be-available iPhone 6 and Apple Watch devices—the first-ever Apple products equipped with NFC technology—Apple Pay works with Apple’s existing Passbook app to enable users to store tokenized payment card data to make in-store payments. (For an instant overview of Apple Pay, click here.) During Apple’s launch event on Tuesday, the company announced a slew of initial supporters, including payments networks American Express, MasterCard and Visa, along with card issuers Bank of America, Capital One Bank, JPMorgan Chase, Citi and Wells Fargo. U.S. Bank announced its support a day later, and additional issuer partners are coming soon.
And, significantly, numerous retailers already are on board. These include Bloomingdale’s, Disney Stores, McDonald’s, Duane Reade, Macy’s, Sephora, Staples, Subway, Walgreens and Whole Foods, along with Apple’s own 258 retail locations. The merchant support could be especially important, as merchant reluctance to install NFC-compatible POS hardware has been one of the key impediments to NFC ubiquity, according to many industry observers. But Apple’s large and dedicated user base could finally give retailers a large enough incentive to adopt NFC. Meanwhile, mobile commerce-focused payments processors Stripe and Braintree (a unit of PayPal Inc.) have announced support for Apple Pay payments and released instructions for developer clients to integrate the service when designing apps. POS systems provider Harbortouch also announced it will support Apple Pay using the company’s Perkwave Terminal.
And with Apple’s support for NFC likely to boost the technology as a whole, even newfound competitors in the mobile wallet space have emerged as possible partners. Softcard—the telecom operator-backed mobile wallet service formerly known as Isis—said this week that it was “actively working” with Apple to enable Softcard’s own wallet on the iPhone 6. Softcard CEO Michael Abbott said in a release that Apple’s support of NFC “sets the stage for rapid scale adoption of mobile commerce” as a whole.
But despite a powerful brand and strong support network, Apple Pay faces many of the same challenges that have confronted other providers of NFC wallets, notes Rick Oglesby, senior research analyst, Double Diamond Group LLC. “Consumers have been offered tap-and-pay products before and have shown a low penchant for adoption. From an offline merchant’s perspective, the big change here is simply that the product is being offered by Apple rather than by Google or Isis/Softcard,” Oglesby tells Paybefore. “That does make a difference, but … either Apple or third party app developers will need to create some big value-added capabilities around Apple Pay in order to drive consumer and merchant adoption offline.” He goes on to note that MCX—the retailer-led mobile wallet consortium—already has rejected an NFC wallet model in favor of a barcode- and cloud-based model. And several of MCX’s biggest retailer members, including Best Buy and Walmart, have said they have no plans to adopt Apple Pay.
However, Oglesby does expect Apple Pay to gain immediate traction online. “Mobile shopping and Apple devices go hand-in-hand, making Apple ubiquitous on both the consumer and merchant sides of mobile shopping,” he notes. “Add in the convenience and security capabilities that others just can’t match, and Apple has strong competitive advantages for online and in-app payments that will pay off quickly.”
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