Watch within the last year, you have likely
learned about Apple Pay. In fact, you have
probably even used it; this mobile payment
system is, after all, very easy to get started with,
a security code the only extra that is necessary
to set up an iTunes-registered payment card
with the service. But what exactly is Apple Pay?
How wide has been its rate of adoption? And
could it turn out to be yet another rich source of
revenue for the company that made it?
AN APPLE PAY KEEPS MONEY
HEADACHES AWAY
Imagine if, every time you bought some food,
clothes or other items at a bricks and mortar
retail outlet, instead of having to fumble around
for loose change in your pocket or spend time
entering in a number code to use your payment
card, you instead simply paid by holding up,
and then pressing or tapping, your mobile
Apple device. That’s the general gist of Apple
Pay, which is intended to streamline routine
payment procedures through extending an
Apple ecosystem you are already part of.
There is, however, more to Apple Pay than this.
You can, for example, also speed up online
shopping payments through using the service
- wherever this option has been integrated by
developers - within e-commerce apps. And
the service is compatible with a large variety of
recently-launched iPhone, iPad and Apple Watch
models. There also remains, however, huge
untapped potential for Apple Pay - and, therefore,
for its impact on Apple’s financial results.
HOW APPLE PAY IS ENHANCING THE
ATTRACTION OF APPLE’S ECOSYSTEM
Though still very much in its infancy, especially
given that the United States and the United
Kingdom remain the only countries in which
it can be widely used, there are promising
signs that many people who have familiarized
themselves with Apple Pay are making their
use of the service a habit. In October, a survey
by the banking consultancy Mercator Advisory
Group revealed that 80% of US-based Apple
Pay customers were using the service at least
once weekly for making purchases.
This should certainly be heartening for Apple,
as it lends further credibility to the notion that
Apple Pay could soon form a major part of
the company’s ecosystem. Business Insider’s
Dave Smith has opined that “Apple’s most
important services are the ones that keep
you in its ecosystem, and Apple Pay might
be the ultimate example of that concept.”
He pointed out that Londoners’ reliance on the
service for easing commuting, for example,
should encourage their loyalty to Apple while
boosting the appeal of Apple devices even to
people who have never previously used any.
APPLE PAY COULD ALSO BRING GOOD
FINANCIAL RETURN FOR APPLE
Nonetheless, it remains unclear exactly when
Apple Pay will start making a noticeable
difference to Apple’s bottom line. At the
corporation’s most recent earnings call in late
October, CEO Tim Cook revealed that Apple
Pay transactions had seen monthly doubledigit
growth - but precise figures for revenue
from the service were not broken out, instead
being obscured in a broad services category also
accounting for revenue from Internet Services
and AppleCare.
It does seem likely that Apple Pay’s adoption
will be largely driven by that of mobile
payments technology as a whole. Apple Pay
Vice President Jennifer Bailey even seemed
to acknowledge this when expressing her
company’s belief that “the UK can be our
leading market for Apple Pay, given the
unique characteristics (of the market)”,
where contactless payment technology was
already widespread. By contrast, that Apple
Pay in Canada and Australia is currently limited
to American Express customers suggests much
more limited revenue from the service in those
countries for now.
CHINA: A “SLEEPING LION”
FOR APPLE, TOO
Following the launches in the US last year,
the UK in July and Canada and Australia in
November, China appears to be the next
country in line for Apple Pay. The Wall Street
Journal has reported, citing sources familiar
with Apple’s plans, that the company is on
course to launch the service in the world’s
most populous country - and, especially
vitally, Apple’s second largest market - by
February, having clinched deals with the
country’s four major state-owned banks.
Apple will undoubtedly have tough
competition in China, not least from Alibaba,
the current kingpin of the East Asian country’s
mobile payments market. But Alibaba also has
reason to fear Apple; the Cupertino company
topped China’s smartphone market in
September with the launch of the iPhone
6S and iPhone 6S Plus, according to statistics
sourced by Counterpoint Research. That
company’s Research Director, Tom Kang,
has observed that Apple “is becoming an
embedded brand in China, standing for luxury
and high quality”; this hints at a considerable
untapped market for Apple Pay.
PAYPAL: AN ALLY OR RIVAL OF APPLE?
Apple Pay also looks likely to be expanded
in not just its international availability, but
also its features. Particular attention has been
drawn to another report from The Wall Street
Journal that Apple is moving ahead with a
person-to-person mobile payments service,
which could see Apple Pay used to send cash
between friends and family. It could be the
next step in furthering a whole new era in
digital money - and, in doing this, Apple could
have a surprising ally...
Despite suggestions that a person-to-person
service from Apple would rival PayPal’s
similarly-purposed Venmo, PayPal also seems
set to, as TechRadar observes, smooth the
widening of Apple Pay take up among
many businesses with its release of the
second version of PayPal Here. This is a card
reader capable of vesting small and seasonal
businesses with NFC support for contactless
payments. The reader’s affordable, thanks
to the absence of monthly fees, and vitally
includes support for Apple Pay.
SO, GENUINELY HOW SECURE
IS APPLE PAY?
Upon the initial announcement of Apple Pay
back in September 2014, Eddy Cue, Apple’s
Senior Vice President of Internet Software
and Services, declared security to be “at the
core of Apple Pay”, pointing out that neither
cashiers nor Apple would have access to such
sensitive details as credit card numbers or
security codes when purchases are made with
Apple Pay. He added that, even if an iPhone
with Apple Pay setted up is lost, payments
from that device could be speedily suspended
through Find My iPhone.
Apple’s claims of stringent security are bold, but
do seem to stand up to scrutiny. The UK website
Macworld observes that Apple encrypts the
entire process of adding new cards to Apple Pay,
while authenticating payments through an iOS
device’s Touch ID fingerprint sensor is secure
as there is only about a one-in-64,000,000
chance of meeting someone else with an
identical fingerprint. And that’s before
consideration is put to the chances of that
person getting hold of the other’s iOS device.
SPEED AND EASE OF USE ARE
FURTHER PLUS POINTS
Apple Pay is wonderfully fast to use, too; an
iPhone doesn’t even have to be woken before
it can be scanned by an NFC terminal for
payment. However, there’s still the necessity of
removing the phone from a pocket to make a
purchase, which doesn’t apply when using the
same service on the Apple Watch. In August, the
research firm Wristly found that 79% of over
1,000 surveyed Apple Watch users in the
US and UK favored using Apple Pay on the
wearable rather than on an iPhone.
Incidentally, our own boss, AppleMagazine CEO
Ivan Castilho, concurs with these sentiments,
having been amazed by the fast and easy
experience of making payments through Apple
Pay on the Apple Watch. He has since adopted
it as his primary method of payment in a range
of scenarios - and, as many more people pick up
new iPhone, iPad and Apple Watch models, the
incentives for them to also start using Apple Pay
regularly should continue stacking up.
by Benjamin Kerry & Gavin Lenaghan
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