Apple Pay: the little guys may just benefit more than the big guys

I’ve been a big proponent of Apple Pay ever since I first saw it in action early this year during a trip to the States — the seamless (ish!) process and the high customer satisfaction of the vast majority of users I saw made this technology progression a no-brainer — but it is not without its challenges and issues — it will upset a few apple carts (pun intended).

I recently spent some time at Wired Money and got to speak with senior several execs who are equally excited and hesitant for some parties.

I asked them all the same questions but have pulled out some interesting points (and resources) and thought it would be interesting to see them side by side.

What effect is Apple Pay likely to have in the long term?

Marty Carroll, CSD of Head: “It’s going to have a profound effect. Most people are thinking about this as just a more convenient payment method but I contend that it’s likely to spawn a whole wave of innovation. In particular the concept of loyalty and specifically rewards will change dramatically. Apple Pay gives retailers the ability to much more accurately target consumers with highly relevant communications and services.

Some pundits will surely sensationalise the threat to privacy but there’s ample evidence that consumers will trade off privacy for convenience or value added services. These will make the current loyalty programmes of the likes of supermarkets, banks and airlines look like child’s play.”

Jason Richelson, CEO and Founder of Shopkeep: “The vast majority of smaller consumer-facing businesses with 1-50 employees are positive about Apple Pay, but don’t believe it will have a material impact on how they operate. Our experience in the US says this thinking is flawed. Business owners in the US that have been quick to embrace mobile payments are growing three times faster than the national average, and going out of business much less often (5% fail within one year vs the 25% national average).”

Roelant Prins, CCO Adyen: “Our latest Mobile Payments Index report tells us that mobile payments now account for 29% of all online transactions, and the UK is steaming ahead, with 44.8% of online payments in the UK made on a mobile device.

With the launch of Apple Pay, this figure will accelerate. Apple devices already dominate 65% of mobile payments in the UK and Apple Pay, with its trademark ease of use, is likely to lower the barriers to mobile payments still further. Additionally, we can expect to see an upwards trend in average transaction value for mobile devices. In the US Apple users have already shown themselves to be the bigger spenders, with Apple Pay transaction values soaring above the average by 50%.”

Jonathan Vaux, Executive Director – New Digital Payments and Strategy at Visa Europe: “The launch of Apple Pay is the latest development in the contactless payment evolution that started with contactless cards in 2008. Our consumer research has already shown us that there is an appetite for mobile contactless payments with nearly half of UK consumers wishing to use their mobile to pay for goods and services in-store using contactless POS terminals.”

How should large and small businesses prepare / use Apple Pay best?

Marty Carroll, CSD of Head: “In short they should rush headlong into this particularly if the retailer is one that typically has low value transactions (below the £30 contactless limit coming in Sept). Why? The payment is faster as the customer is not messing about pulling cards from their wallet or entering PIN numbers, it’s more secure owing to tokenisation, embracing Apple Pay demonstrates customer centricity to the customer base and lastly, linking back to the points above it will, in the longer term, offer big opportunities to link loyalty and rewards.

One issue that has come up in the US is handling refunds for consumers using Apple Pay because a refund is usually given to the card number but as no card number passes to the merchant that can’t be done. The reality is that it’s as simple as touching the phone against the reader (as with a purchase) but it may cause some minor issues with staff used to the prevailing method.”

Stefan Thomas, CTO of Ripple Labs: “Large businesses should get ready to leverage value-add functionality in future iterations of Apple Pay, such as loyalty points and coupons. Small businesses need to evaluate their mobile payments strategy.

Solutions like Square’s upcoming Contactless and Chip reader are the most cost-effective way to stay current and provide customers with a seamless experience for a wide variety of payments options.”

What problems will Apple Pay cause (and for whom)?

Jason Richelson, CEO and Founder of Shopkeep: “Small businesses, mainly. There are several factors that lead us to predict consumer adoption rates that dramatically outpace the US precedent: the early adoption of Chip and PIN; the comparative success of contactless cards; the fact that the UK now spends more on card than cash; and the decision by TFL to accept this form of payment on London’s public transportation.

People will expect cashless transactions wherever they go and if smaller business in particular want to prosper, they must embrace the technology. These systems have become readily available and inexpensive over the last few years and implementing them will assist in delivering an improved customer experience. Put it this way, any business that wants to exist in the future has to prepare for it.”

Stefan Thomas, CTO of Ripple Labs: “Long term, Apple might decide to disintermediate the card networks or even the banks themselves. According to the 2015 annual trust barometer by Edelman, technology companies are the most trusted sector (78%) while banks the second-least trusted (53%), so combined with better user experience and lower cost Apple has a huge opportunity for disruption.”

Marty Carroll, CSD of Head: “The threat to traditional banks is huge. Apple, of course, is inserting itself as the interface between the card issuers (often banks) and the consumer giving them enormous power. What has happened in music is now going to happen in banking.

Barclays has decided not to get on the bus and launch bPay instead. bPay, in my view, is the Betamax of our time and definitely will not succeed. The smart banks are those that welcome Apple Pay and find innovative ways to profit from it rather than fight it.”



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