By Greg Petro
Apple has finally released its highly anticipated mobile payment app, Apple Pay. The tech titan released the update and app on October 20, marking its first foray into the semi-explored world of mobile payments and possibly changing the checkout line forever. But what does Apple’s entrance into the market mean for retailers? They’ve been able to drag their feet on mobile point of sale (POS) strategies…until now.
The mobile payment idea isn’t a new one, but while other players entered the market – Google, Verizon, and AT&T – Apple sat back and watched. For years, retailers weren’t motivated to embrace mobile payments for two primary reasons: first, the valuable consumer data they gather from traditional POS systems would no longer be available, and second, they felt mobile payments would make hacking and fraud even more likely. On the consumer side, mobile payment hasn’t been ubiquitous enough.
Photo courtesy of Apple
But Apple has the advantage. Consumers love Apple because they’ve earned consumer trust – Apple is an emotional, iconic brand. And, Apple has overcome many of the retailers’ concerns, which will persuade them to get on board. Happy, devoted customer, meet compliant, eager retailer.
Through the app, a user can take a picture of her credit card, storing the information from the card in her iPhone. The Verge reported that the appcurrently supports Visa, MasterCard, American Express and a few other major banks. Smaller banks and credit unions have yet to join in, though Apple stated that 500 more banks are slated for inclusion by early next year.
Along with the app’s release, Apple announced that there are 220,000 stores and retailers throughout the U.S. that already allow consumers to pay for their goods using Apple Pay. Once the app is loaded with the user’s credit card information, all he or she has to do is approach the terminal at the participating retailer, hold the phone up to it and swipe the screen, utilizing the user’s fingerprint to authenticate the purchase.
Mobile payments – money’s new frontier?
This level of convenience could change the way that consumers buy products in both brick-and-mortar stores and online. According to The New York Times, a mobile payment app like Apple Pay could have the same impact on credit and debit cards that the cards had on cash and checks. As the Times said, it’s like taking the “card” out of credit card. In 2012, there were about 750 million credit cards in use in the U.S. As smartphone adoption increases in the coming years, mobile payments could climb to similar levels.
In 2013, consumers spent only $1.6 billion through “contactless” mobile methods. Compare that to the $264.3 billion spent on e-commerce and the staggering $4.26 trillion consumers spent on traditional, in-store purchases. Right now, mobile payments account for a miniscule fraction of total payments for e-commerce and in-store purchases. The potential for growth on the consumer side of the market in the mobile payment sector is massive.
While the convenience of smartphone-enabled payments will appeal to customers, the major obstacles that plagued previous entrants into this market fell on the side of the retailers. Moving into a digital and big data-driven world means that retailers want each transaction to generate useful customer information that can be used in predictive analytics and other vital business intelligence functions.
In addition to being bereft of the quantity and quality of data that businesses want out of their customers, previous efforts toward mobile payments have fallen short when it comes to linking up with retailers’ loyalty and rewards programs. This has been the big thorn in the side of previous mobile payment app makers and the key reason why so few retailers have gotten on board.
What makes Apple Pay different?
Tech and communications giants like Google, Verizon and AT&T have all been players in the mobile payment game for a few years now, but even with all of the clout that the three share, smartphone payments have yet to carve out a foothold in this space. But Apple Pay has a few features that may finally break ground on getting both consumers and retailers to buy in.
As The Verge noted, credit card data theft has been the bane of retail’s existence over the last few years. With mobile payment, one of the major concerns was that it would create more chances for thieves to access customer and company data. With Apple Pay, however, credit card data is not stored or even shown to the retailer. Everything is stored on the phone itself, something Apple hopes will make it much harder for hackers to access the information.
Additionally, some industry watchers believe that Apple’s previous successes in the consumer market could be what pushes mobile payments over the edge to widespread adoption. Apple has a relationship with the consumer market which is envied by many, including Google. If Apple is putting its brand behind the new app, then consumers are likely to want it. In retail, as in all business, if the customers want something in large enough numbers, companies must respond in kind.
The question is, how will they respond? Investors have been forgiving thus far, as there wasn’t a mobile pay zeitgeist on the horizon, but that has all changed with Apple Pay. Retailers need to get in the game now, or risk losing ground. A rising tide lifts all boats – time to sink or swim with it.
In my previous article, “How Proximity Marketing Is Driving Retail Sales,” I talked about technology that is closing the gap between the consumer and retail conversion. In my next article I will discuss how Proximity Marketing and mobile payments can ultimately bridge the gap between consumers and retailers and drive loyalty to a whole new level.
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