Apple Pay Mobile Wallet

Apple Pay was introduced with grand fanfare in late 2014 and appears to have grown in acceptance by merchants and users ever since. At Apple’s Watch event, Tim Cook has announced that Apple Pay is now accepted at over 700,000 locations. That includes 50,000 Coca-Cola machines, where as many as 100,000 units will take the wireless payments by the end of the year. This compares to just 220,000 points of sale at introduction, reflecting both the acceptance of Apple Pay and the quickening conversion to NFC terminals by merchants. This acceptance should only increase with the addition of Apple Watch users.

Apple-Pay-main

 

Strengths:

  • Apple Pay offers the best user experience for making mobile payments currently in the marketplace.
  • Pioneered the concept of tokenization for mobile payments with the help of Visa and MasterCard. This authentications has the potential to effectively eliminate traditional card fraud associated with magstripe based credit cards.
  • Successfully integrated biometrics using the proprietary TouchID sensor to provide a new easy way to pay. When the customer presents the phone near the NFC enabled contactless payment terminal, the wallet loads automatically without having to launch an app thereby providing a smooth user experience.
  • Payment credentials are stored in the cloud, while the token is stored in a secure element (does not need an internet connection to use Apple Pay).
  • Card enrollment and provisioning is automatic via iTunes or by taking a photo of the card (Green Path).
  • Can be used in NFC enabled POS as well as in-app.
  • Apple managed to bring most of the payment networks and banks/credit unions to execute a near textbook perfect launch. More financial institutions are signing up to attract the affluent Apple customers as part of their customer base and to compete for the ‘top of wallet’ spot in their customers mobile wallet.

Weaknesses:

  • Merchant Adoption – a fair number of businesses still do not have support for NFC contactless terminals limiting the use of Apple Pay.
  • No rewards program is another limitation with Apple Pay. (the card used to pay may have rewards)
  • Apple Pay is proprietary to the iOS ecosystem, effectively ruling out the Android user base which has a significant number of users in the US and worldwide.

Opportunities:

  • As more of the newer iPhones get sold, Apple Pay will gain traction and people will try Apple Pay … increasing adoption.
  • The launch of Apple Watch opens up Apple Pay to older iPhones (5S, 5C), which may add additional users who have not upgraded to the newer iPhones.
  • As we see more merchants adopting NFC enabled terminals to support EMV liability shift in 2015, the number of locations accepting Apple Pay will grow.

Threats:

  • Apple Pay has been in news lately due to some of the reported low-tech fraud activity. Even though none of this has anything to do with the security measures Apple put in place in designing Apple Pay, the weakest link in the whole scheme is the Yellow Path for provisioning cards for users. Financial institutions launched Apple Pay without much time to account for newer security threats.

Analysis:

  • Apple Pay is a surprisingly solid offering for ‘version 1′ and can only get better. Customers who use Apple Pay show strong affinity for paying with Apple Pay as more locations start to accept it.

Author: Jason Williams

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