One of the major features which defined iOS 8 as a success was Apple Pay. Combined with Touch ID, Apple Pay allows users to make purchases on their iPhone using finger-print scanning technology equipped on iPhone 5 and 6. Apple Pay has aroused its fair share of controversy from the banks, who claim Apple, in addition to Google and Paypal, is infringing on one of their core revenue streams. This post will explore the ins and outs of Apple Pay, it’s potential impact on eCommerce, and what it has to offer your business.
Let’s start with the basics. Apple Pay is a mobile payment system and digital wallet designed to make both in-store and online purchasing easier for the user. When purchasing items on a smartphone from iTunes, the App Store, or third-party apps, Apple Pay uses Touch ID for instant check-out. When purchasing items in-store, Apple Pay utilizes near-field communications so that, like in the digital world, all it takes is a fingerprint scan for a seamless check-out experience.
Apple Pay is not the first of it’s kind. Google Wallet, launched in 2011, was the first major mobile payment system. Google Wallet also utilized near field communications, bu Google Wallet, unlike Apple Pay, did not catch on in any big way. In fact, the recent surge in Apple Pay use has actually caused a resurgence in Google Wallet use.
One of the main differences between the two platforms is Apple Pay’s insistence on protecting the user’s private information. “We are not in the business of collecting your data,” said Apple’s Senior Vice President of Internet Software and Services Eddy Cue at the Apple Pay announcement in September. “So when you go to a physical business and use Apple Pay, Apple doesn’t know what you bought, where you bought it, or how much you paid for it. The transaction is between you, the merchant, and your bank.”
When you add a card with Apple Pay, it only stores a portion of your credit card information, along with a device-specific Device Account Number, but all of your personal information is encrypted. Apple Pay demonstrates it’s not only possible to have secure in-store mobile transactions on your iPhone, but these transactions are actually even more secure than physical ones.
Apple Pay has been expanding rapidly. It launched with the support of McDonalds, Whole Foods, Nike, and Uber. Recently, ten more banks, including SunTrust, TD Bank North, and Commerce Bank all agreed to use the service. Apple says in a recent New York Times article it supports the cards of 90% of the credit card purchase volume in the US.
Statistics on Apple Pay point to staggering potential. According to MarketingLand, in September 2014, 49.7% of online shopping done on a mobile phone was on an iPhone. 81.6% of tablet e-commerce transactions are done on iPads.
So what does Apple Pay mean for eCommerce? For one, it makes secure purchasing easier than ever for consumers. There’s hope that given the increased competition in payment options, retailers could see decreased fees and improved profit margins.
Alex Martins, chief executive of the Orlando Magic, recently said to the New York Times: “One of the biggest pieces of feedback we get from our fans is that the food and beverage lines are too long… It keeps them from going to the concession stand because they don’t want to miss the action. This, and technologies like Apple Pay, will speed up our service.”
Retailers are also hoping for opportunities to team up with Apple Pay for promotions, however, this would require Apple to keep transaction data in their database, which Apple is currently opposed to for security reasons. As the service refines, it seems inevitable there will be exclusive Apple Pay deals and more of an effort to push consumers to utilize the service. The question is whether Apple Pay will eventually be able to take the next step and replace physical credit cards. Only time will tell.
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