Apple Pay Finally Makes Digital Wallets a Reality
Digital Wallets have been around for years but haven't been widely adopted by the general public. Even the big players like Google and the wireless carriers couldn't move the needle. But there is one player with a track record for changing paradigms that will change the way we pay for things forever.
That player is, of course, Apple that the payment method is "Apple Pay". It launched on October 20, 2014. Apple Pay takes some of the best elements from what Google tried to do but simplifies things based on Apple's unique control of both hardware and software. Apple was able to marshall support from 500+ banks and dozens of retailers to finally give digital wallets the necessary critical mass to finally succeed.
It'll be 3 years before we'll say goodbye to the plastic credit cards in our wallet. The infrastructure needs to be built out. Currently Apply Pay only works on the latest iPhone 6. Additionally, also point of sale terminals need a special computer chip called NFC (near field communications). So, it'll take a while for smaller retailers to adapt.
Credit Care Issuing Banks to Grow
There are currently only 6 banks supplying credit and debit cards that work on Apple Pay: Citi, Wells Fargo, Bank of America, Capital One and JP Morgan Chase. However, in early 2015, there will be an additional 500 regional and local banks on board.
Large Retailer Support
Many large retailers are ready accept Apple Pay and are equipped with NFC point-of-sale terminals: McDonald's, Subway, Macy's, Whole Foods, Walgreens and others are part of the first wave. Many more will be joining in.
But accepting Apple Pay is open to any retailer, even mom and pop. To participate all a retailer needs is a NFC-equipped point-of-sale terminal. If the NFC feature is activated, the retailer can automatically accept Apple Pay. The newer models of terminals such as VeriFone VX 520 already have the NFC chip installed.
Advanced Security
The best feature is how well architected the Apple Pay security is. It has multiple layers of security in the system. You can't use the cards without scanning a fingerprint using Touch ID, but perhaps more importantly, the credit card numbers are no longer transmitted across the network or stored by merchants. It uses advanced tokenization security.
When you make a transaction a special number will be sent to the processor instead of your actual card number. That "token" is useless to a thief or hacker. If your iPhone does get stolen, you'll be able to shut it down with "Find My iPhone".
Easy for Consumers to Use
For users, getting started is simple, first they will need to purchase an iPhone 6 or 6 Plus. If you they have an iTunes account, they actually already have at least one credit card in the system. To add others, they'll be able to scan them in with their iPhone's camera.
To make a purchase at a store, the point of sale terminal will flash the amount due on the iPhone, the consumer then selects the specific credit card they want to use on their display screen, presses the Touch ID button, which is unique to their fingerprint, and the transaction is completed, quickly, no signature required. Transaction history is stored in the phone so no receipt is necessary, no emails required.
Should Merchants Rush to Adopt?
At ACI Merchant Systems, we began deploying the VeriFone VX 520 point of sale terminals to our new merchants beginning in 2015 in anticipation of both EMV security requirement and digital wallet advancements. Soon there will be a download available to enable each feature. We have an upgrade program to get merchants with older terminals to be able to launch these features.
Again, Apple Pay is not going to happen overnight, although 39 million iPhone 6's were sold, that's out of roughly 185 million smartphones in use, that's 21% of the phones with the capability to use Apple Pay. Plus, Android is not going to lose market share quickly, so statistically speaking a fraction of consumers will be wanting Apple Pay from their retailers.
But, the elegance and great user experience is there and the shift will be starting.
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