Apple Pay and the Implications for Retail Payments
By John Gessau, ACI Worldwide
With the news of the iPhone 6 and Apple Watch debuting with mobile wallet capabilities in the marketplace, Apple’s announcement has given the (mobile) payments industry a boost, no doubt about it. But in what direction, and what are the implications for retailers?
At long last we have near field communication (NFC) built into the hardware, which goes a long way in addressing the chicken and egg problem, and means that industry players will have a lot more reason to support NFC payments. Together with TouchID and the Secure Element, not to mention the integration with Apple Watch, the complementing technologies look quite promising.
But the technologies are not at the heart of what Apple has delivered to the industry. What is far more significant is the effort they have expended in partnering with key industry players to pave a pathway toward success. Their approach of making the value of the wallet greater to both participants and consumers paves the way to ensure wide acceptance, greater relevance and thus broad adoption of their wallet. This is where other players have failed, despite the inclusion of compelling technology.
Their list of key banks, card associations and especially retailers is impressive. Not everyone can pull off such a level of agreements, and Apple’s trump card was that they’ve decided to let the banks and the merchants own the big data. This is truly significant, since in one statement they took a massive stab at some of their biggest competition, and at the same time opened the door to everyone else. They didn’t even talk about loyalty, rewards, coupons and the like; they didn’t need to. It will now come to them from willing participants who need not feel threatened.
What does this mean for retailers?
Before anything else, retailers need to understand what their goals are in implementing any mobile payments/POS strategy. This has to be a business decision, as opposed to a technology decision. Secondly, retailers should see the current mobile disruption as an opportunity to review their overall omni-channel payments strategy. They would do well to avoid leaping into such a volatile environment by deploying a solution that will not meet their needs, only to find that they require a ‘rip and replace’ down the road as the market evolves. Mobile programs should be implemented as part of a holistic payment strategy - and at the same time the underpinning payment strategy should support the inevitable evolution around mobile payments.
Only in the context of clarity around their own strategy should the question around the implications of Apple’s strategy be considered. Retailers need to decide when they want to start accepting Apple payments, what they need to change on the POS, and how they train their staff and help their customers understand the checkout process (and related processes such as disputes). The really good news is that the payment rails have been left intact. The key change is the acceleration toward NFC and tokenization.
Nevertheless, retailers would do well to remember that while Apple is a significant player, more consumers have Android phones than iPhones. U.S.-based retailers would also do well to carefully consider their support for MCX wallets on its recently-announced CurrentC platform, the newly-rebranded Softcard wallet (formerly ISIS), Apple’s mobile wallet, and other players in the market. How can loyalty programs, coupons, offers and other marketing programs best drive consumer behavior? Which wallet(s) will be most beneficial to their brand and to their customers, and ultimately drive most value down to the bottom line?
Despite excitement around Apple’s announcement, this news is but one more disruption in a significantly disrupted industry. And it won’t be the last. We can be sure that the other players have their own strategies under development. Retailers can react defensively, looking to see how to protect their current market share, or they can see the rapid pace of disruption as an opportunity to differentiate themselves, capture new market share, and extend their brand in new ways.
In conclusion: It’s clear that Apple is taking mobile payments seriously. And as one of the most significant influencers in the industry, we had all better sit up and take note. They’ve played a masterful stroke. But remember: Keep it true to your own strategy.
John Gessau is director, product management, ACI Worldwide, which delivers electronic banking and payment solutions for financial institutions, retailers, billers and processors around the world.