Apple was once associated with a fruit than with a phone and now with payments. Strange evolution for a name as it may seem, the announcement of Apple Pay did not surprise no one. This move by Apple came several years after major players such as Google have already launched mobile-payment related solutions. It was clear that Apple will enter the game, the only question was when and how.
While many can criticize Apple’s closed-garden approach, no one can deny the fact that Apple is indeed a market shaper. There were music players and then came the revolutionary iPod, there were smart phones and then came iPhone. And the same will happen with Apple Pay, this solution is likely to set the tone for mobile payments.
Look, we can always argue if Apple products are the best or not. It does not even mean that Apple products possesses the widest adaption rate either. However, the name Apple and the products under its portfolio clearly shapes the nature of the market in the distinguished domains that they play in.
And such will be the role that soon Apple Pay will play – a solution designed to allow iPhone users to make payments for goods and services with their iPhones, both in stores and within participating applications.
In this article we will focus only on the in-app payment, leaving the physical shops aside.
So let us start with the basics. Apple Pay gives customers an easy and secure way to pay for services and goods in iOS 8 applications by using payment and shipping information that are stored in the phone.
The phone is being used for two main activities:
:: Store your credit card details securely
:: Authenticate the identity of the card holder
When shopping for goods and services within app, the common user experience comprise from several steps that are tedious and causes high percentage of dropping. Actually according to Baymard Institute, a web research company in the UK, 67.45% of online shopping are abandoned in the shopping cart and payment stage.
Apply Pay aims to improve the payment experience by utilizing data that the user already stored on the phone, such as credit cards details, address and shipping address.
The typical mobile payment flow is a multi-step process that involves:
Step 1) Adding an item to the cart
Step 2) Entering delivery info and shipping method
Step 3) Selecting payment method
Step 4) Entering payment info, including billing address
Step 5) Reviewing and tapping to complete the order.
With Apple Pay, the five steps have been reduced to three and the new flow would be:
Step 1) Adding item to cart
Step 2) Tap Apple Pay button
Step 3) Confirm details and complete the transaction via Touch ID
Apple Pay makes the experience more seamless by relying on stored payment and address data, requiring fewer taps to purchase.
Absolutely! As far as Apple is concerned the more the merrier, as long as the app was approved and certified by apple and approved for Apple Pay.
Currently several leading applications implemented Apple Pay such as Uber, Groupon, Starbucks, Disney and OpenTable.
In fact Apple is making efforts to encourage more apps to support Apple Pay.
Despite the high skepticism around the security of mobile payments in general, using Apple Pay is more secure than using your good old credit card.
The credit card details aren't actually stored on the iPhone, or on Apple's servers. The actual card details are not kept in the device, a unique Device Account Number, using a technique called tokenisation is implemented, with it replacing a sensitive data such as credit card with a random piece of data.
Practically if your phone is lost or transaction was intercepted, the actual credit card details are not exposed.
User can also block the payment feature by using “Find my iPhone” by putting your phone in Lost Mode (many people would wish to have feature find my wallet).
Apple doesn’t tell merchant anything about the buyer, therefore potentially can use it in apps without having to sign up for an account. When you pay in an app, Apple Pay keep anonymous transaction information such as approximate purchase amount, merchant and app identifiers and approximate date and time.
To complete the payment, the user needs to authenticate his finger print by using Apple Touch ID. Fingerprint is the perfect and ultimate password. You always have it with you, no one can guess it and you are not attempted to choose “sophisticated” password like 123 you know what I am talking about right?..)
Apparently not. As a security measure, Tokenisation reduces or removes the need to update existing systems that require a credit-card number, without exposing the real number to theft.
First, you’ll need a device that supports Apple Pay. In order to pay in stores you need Apple’s two newest phones, the iPhone 6 and iPhone 6 Plus, which have the necessary NFC (“near-field communication”) chip. For in-app payments, you can also use Apple’s two newest iPads, the iPad Air 2 and iPad mini 3.
Those devices have the Touch ID, which scans your fingerprint and authenticates the identity of the device owner. In the near future Apple Way will work with Apple Watch due in 2015.
You will need a supported credit cards which is stored in your iTunes account. Adding new cards is done via the Passbook application. Apple established relations with key banks in US and in rotations with Visa, MasterCard and American Express.
Apple doesn’t charge anybody anything for the use of Apple Pay. They see is as additional feature to iPhone 6 and another component in Apple ecosystem and not as another source of income. Apple is charging the acquiring banks from the fee taking from the merchant. So practically for the merchant and for the end-user the service is free and do not create any overhead cost burden.
What does this mean for the payments industry then?
Apple uses the existing credit cards infrastructure and changed the final mile of the user payment experience. It has made it friendlier and added the “Apple coolness” spice.
Currently, customers still needs to apply for credit cards from their banks and merchants still needs to set their merchant account, however it is possible that Apple will move to disrupt the payments industry over time.
The article was contributed by YuuPay, leading Global Payment Service Provider for Online and Mobile Merchants.
Yoav is the CEO of YuuPay Secure Pte Ltd, a Singapore-based Payment Service Provider. He has over 15 years of experience in the Payment, Mobile and IT Industry, specializing in Mobile Payment, Mobile Value Added Services (VAS) and Internet and Mobile content. He has an MBA from Heriot Watt University and a BA in IT and Business Administration.
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