Apple Pay Today

Apple’s disruptive force has been well documented and is used as a textbook case study in classrooms and boardrooms around the world every day. The most obvious example is its major disruption to the traditional music business model. The world now listens to, buys and curates music in ways not imaginable 15 years ago. The music world has been changed forever.

During this period of incredible change, Apple has released new technology services with varying levels of success. The iPhone and iPad are among the best, while Apple Music and Apple Maps have not lived up to expectations.

Now there’s Apple Pay, Apple’s answer to a mobile payment service and digital wallet all wrapped up in one. It uses the secure Near Field Communication (NFC) technology for contactless payments between retail terminals and Apple devices (iPhone and Apple Watch).

This isn’t new, particularly unique, or disruptive. So what’s all the fuss about?

The Digital Competition

There are many other entrants in the increasingly competitive digital payment market. Google Wallet and Android Pay are here now. Samsung is releasing its service in the first half of this year and PayPal introduced One Touch back in 2014. Major retailers in the US are developing their own solutions, including Target and Walmart. That doesn’t take into account the fact that most Australian banks have been providing this service for almost two years.

Slow Take-up

Besides an increasingly crowded field of players in the market, some have maintained it’s a solution looking for a problem. Less than 30% of iPhone and Android users in the US use these digital services, carving out $3.7 billion of retail spending. This is a minuscule amount compared to the $16 trillion spent on retail and services annually.

But the market is growing more than 100% year on year. Unlike music disruption, digital payments will take longer to make an impact. Those companies with deep pockets will be able to wait it out to gain major market share. Very few have pockets as deep as Apple.

Apple hasn’t been waiting idly for the market to catch-up. It cleverly lined-up the release of Apple Pay to coincide with the deadline for retail merchants to upgrade to ‘chip’ technology terminals. This is less of an impact in Australia where, once again, this option has been widely available for some time.

The other big announcement at the end of 2015 was the deal with China’s UnionPay. This is a big deal for Apple as UnionPay is the Chinese Government’s only issuer of bank cards. The deal gives Apple access to a market that already has half-a-billion smartphone users and growing.

Bricks and Mortar vs Mobile

The take-up of Apple Pay and digital payments in general has been slow among retailers. This is due largely to the need for NFC (Near Field Communication) enabled terminals. However, with the passing of the October 2015 deadline that required retailers to implement newer chip reading technology, this will gain momentum over the next year.

Once again, Apple has not been twiddling its thumbs waiting for this to happen organically. In the background they have been putting energy into making Apple Pay the default payment method for mobile commerce. There are currently thousands of apps that use Apple Pay. This is a much smaller investment for businesses, as it only requires a minor code change, as opposed to an entirely new terminal.

Apple Pay in Australia

It has been widely reported that Australian banks have rejected Apple Pay and adopted Android Pay instead, leaving Apple to partner directly with American Express. But negotiations between the banks and Apple are still continuing in the background, which leaves many commentators saying it’s a matter of time before Apple Pay is widely available.

Apple’s Unique Differentiator

Where Apple differs from the competition is that it is the only end-to-end deliverer. It owns the hardware (iPhones, Apple Watch), the software (iO/S), and the services (iTunes, App Store, Apple TV). This gives it an advantage in creating services that no other player can match. However, this in itself isn’t something that jettisons Apple light-years ahead, like the iPod and iTunes did.

As it stands today, Apple Pay is another digital payment system that fits neatly within its eco-system of services. It may be ahead of the competition, but only just.

To find out more about digital payments and other leading-edge technologies, contact a member of our expert team.

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