With Apple now using near-field-communication technology in its devices, will tap-and-go payments take off among consumers?
Apple has transformed industries with its products and it has long been hoped it would use its clout to give the mobile payments industry a boost. With its latest product launches of the iPhone 6, iPhone 6 Plus and the Apple Watch, Apple is not reinventing the wheel for mobile payments, but what is significant is that Apple has finally decided to use near-field-communication (NFC) technology in its devices.
NFC has been used in cards and phones so that consumers in the physical world can ‘tap and go’ for small payments. However, uptake of contactless NFC payments has been disappointing, plagued by the chicken-and-egg problem: consumers would not demand NFC-enabled devices if they could not use them anywhere and merchants would not install the terminals if no-one wanted to use them.
Speculation about NFC has accompanied each recent release of the iPhone, with observers hoping that Apple’s use of NFC would provide the tipping point for consumers and the demand for NFC-enabled terminals in stores.
On the iPhone 6, instead of using an NFC chip, Apple will use an NFC aerial that is used in combination with Touch ID, so that to pay, the user holds their finger on the fingerprint sensor while waving the phone over the terminal. When the payment is complete, the phone will vibrate.
This solves the issuance problem for NFC as consumers will now have the devices in their hands. On the acceptance side, in the US merchants will be upgrading their terminals anyway in 2015 ahead of the switch to EMV chip and PIN (away from swiping and signing for card payments) so it will make sense for them to install NFC-ready terminals at the same time.
Users of Apple Pay have to pre-register their debit or credit cards for the service. With Apple flexing its muscles in the payments world, the banking industry needs to take note. What is significant about the launch of Apple Pay, however, is the acknowledgement that Apple has given to the entire ecosystem that is needed for a mobile application to work. Immediately following Apple’s announcement came statements from major processors, payment networks and major issuing banks that they would all support Apple Pay.
While all the ingredients are there for NFC tap-and-go payments to be a success, there still has to be a compelling reason for consumers to use this over the existing alternatives. It will be interesting to see how Apple Pay is adopted, but for now it does not signal the imminent end of cash and cards.
