Digital Transactions Authoritative, insightful and timely information for payments professionals
By Nate Stewart. Zing
Apple Inc. has finally entered the mobile-payments game, and yes, it’s a big deal. The reaction, though, has been veering toward the negative aspects of Apple’s move and how it could hurt different industry players.
The reality is quite the opposite. Apple has just become the great enabler of mobile payments in what should become the start of a smoother, highly adopted path for our industry.
The truth is that this had to happen. But why Apple? Why couldn’t anyone else break through? And what’s the core problem behind the current lack of mobile-payments adoption?
Since 2011, Android has had support for payments enabled by near-field communication (NFC) via Google Wallet. Many thought that NFC support was the start of a trend. However, since then we’ve seen wallets come and go, including Square Inc.’s recently canceled Square Wallet (launched as “Card Case”). Consumer interest has not kept up with the onslaught of press fanfare. As of the first quarter this year, only 16% of consumers were using mobile payments in retail stores. The key problem has always been about lowering friction while adding value on top. Unfortunately for apps, credit cards already do that rather well.
Apple’s release changes this for the better. It provides a clear, frictionless, accepted flow for consumers, with the ability to add value on top rather easily. Using TouchID, your phone can be quicker and safer for payments than pulling a card out of your wallet. And this seamless experience can be translated to apps and Web sites, so the same payment flow is used. This familiarity is key to adoption, and you should expect it to be layered in with discounts and loyalty programs to encourage repeat use.
Another key element is how Apple is working with existing payments-industry players. Instead of taking over the payments rails, Apple is augmenting them and allowing for partnerships with payments processors. Because of this approach, adoption of Apple Pay is already slated for support by every leading payments provider. Apple Pay’s launch with Stripe, Chase Paymentech, Cybersource, First Data Corp., and Total System Services Inc. (TSYS) has pressured other payments providers to jump on the bandwagon, like PayPal Inc.subsidiary Braintree.
With Apple seen as a clear mobile-payments winner, even before Apple Pay is officially live, other mobile-payment companies will be following its lead. The pressure to streamline apps, like Apple has, will create a more unified experience that will help boost consumer adoption and repeat engagement. Adoption of all payments apps will rise, similar to how Instagram led the charge in the photo-app craze and then competitors like Snapchat followed. More payments apps will be released, but they will need to follow the trend as well as add differentiation and value on top to succeed.
As was the case with TouchID, Apple’s eventual release of an application programming interface (API) for Apply Pay will allow for more robust apps and integrations. This is where Apple’s strategy gets really interesting, as Apple Pay could effectively become the one-click button for all iOS apps and Web sites via Safari. With the same payments flow potentially applied everywhere, conversion rates on iOS would skyrocket.
The TouchID software development kit (Apple’s integration tools for developers) was just released along with iOS8, almost 11 months after the launch of the iPhone 5s. This timeline could indicate how long it will take for an Apple Pay SDK to be released.
All this innovation from Apple is great for the industry. It’s the push mobile payments needs to become a normal part of the average consumer’s life. In five years, when we look back, Apple Pay will be seen as a turning point for mobile payments and consumer adoption.
Nate Stewart is chief executive and founder of Austin, Texas –based Zing.
