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Apple Pay arrives, heralding a new era in money – maybe

A new kind of pay system for store purchases is at hand. Only time will tell whether it is the new wave of payment or just a passing fad. The smart money, pardon the pun, is that the new Apple Pay will signal a new era in how people pay for store-bought items.

I know at least three instances in the past few months where friends have either lost their wallets or have had them stolen. The new Apple Pay, which is connected to the iPhone, could obviate the need for credit cards and mitigate the pain of a lost wallet. The smartphone, that ubiquitous communication device, is seldom out of sight of its user. It’s the thing that no one loses. Now, by simply pushing a button on the iPhone, you can pay for your purchase without the aid of a plastic card or, perish the thought, cash.

Tech Giants and telecom companies have tried for years to replace the traditional wallet with smartphone apps that would allow the user to simply click or swipe using the hand-held gadget. They have met with limited success as people push- back at the new technology. But many in the know think that the new Apple Pay could be the catalyst for sparking a revolution to digital payment for goods and services much the way Apple did the mobile phone industry.

This would be a giant step in the evolution of payment for goods and services which began with cash and coin. Next came bank checks ,credit cards and debit cards. Still the most popular form of payment, credit cards have been in existence for decades. Once a status symbol, it soon became de rigeur. By 2012, nearly three-quarters of a billion credit cards were being used in the United States alone, according to the Federal Reserve.

Up until now, only a relatively few people avail themselves of smartphone technology for store payments. According to estimates from eMarketer, a market research firm, consumers spent $1.6 billion using contactless mobile phone payments. This is a tiny fraction of the $246.3 billion e-commerce market and even more minuscule when compared to the $4.26 trillion in traditional in-store retail purchases. This would seem like an unenviable situation for Apple as they embark on this economic pathway. But their eyes are on the bigger prize in the hundreds of billions of dollars that are apparently up for grabs.

Right now, people can simply wave their phone in front of a properly equipped payment terminal at retailers like Whole Foods and McDonalds, and then verify their purchase with a scan of their fingerprint using the iPhones scanning hardware. Nifty. Why then is Apple so optimistic when others such as Google and Verizon failed to capitalize on this market? Many in the industry point to a new system due to be rolled out within a year- an upgraded platform to make credit card usage more secure, which merchants will have to adopt. The initials of the new program, EMV, stand for Europay, MasterCard and Visa.

That new technology will accommodate devices such as the iPhone 6. So Apple’s position and timing seems to be spot-on. This could supply the impetus for acceptance of mobile phone payment by merchants as they have to change systems anyway. Heretofore, there was not much incentive to do so. ’Apples timing here is an astute stroke of brilliance,” said Norm Merritt, president of ShopKeep, a start-up which sells point-of-sales products for small businesses. ’People will already have to invest in new EMV enabled machines. …(iPhone 6) is just a few bucks more.” In addition, Apple will support it with a huge campaign touting the safety of mobile phone payment over credit cards.

Apple Pay will employ a myriad of security features to enhance safety such as a unique, encoded passcode that will help determine if a transaction is legitimate. ’Their brand, their technology and their choices in security made it compelling to us,” said James Anderson, senior vice-president of emerging payments at MasterCard. He singled out for praise Apple’s fingerprint ID system in the iPhone 6 as an impressive way to thwart credit card fraud.

It remains to be seen how fast, or if at all, people will flock to this new device and new system. After all, credit cards have been around for decades and cash forever. But if it gains even a bit of traction, watch out for the follow-on effect. For fifty years ago who would have thought that so much could be paid for with plastic?


Stan Ward Stan Ward has enjoyed writing for 50 years. Writing has been a comfortable companion to a successful business and teaching career for him. Find him on Google+.

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