Ignore the Naysayers! Here's Why Apple Pay Will Be a Winner
Allen, TX - February 10, 2015
By Jeff Thorness
Here's a resolution that the payments industry should consider: Stop doubting market capabilities and start anticipating currents within the technological wave. With the unveiling of Apple Pay, naysayers are already coming out in full force. However, I've spent considerable time in the card-not-present environment, giving me a unique perspective on these developments.
With every introduction of new technology, the innovation usually precedes the industry's ability-and many times willingness-to adapt. But when the innovation makes sense for merchants and consumers, the market grudgingly bends to the will of the players. From my vantage point, Apple Pay is no different.
While the initial adoption of Apple Pay may be a slow burn, rest assured, it will catch fire. Apple's reputation for re-imagining products into completely new innovations is the stuff legends are made of. And brilliantly, Apple is not completely disrupting the payment industry with Apple Pay; instead, it is innovating and supporting the existing industry, which will make all the difference.
Let me explain.
While arguments have been made that Apple Pay and NFC technology offer limited value to merchants, the fact remains that NFC technology already permeates the market. EMV devices, which merchants have either already adopted or will be adopting in the coming years, are typically NFC ready.
As a result, there will be no incremental costs for merchants to accept Apple Pay. The only expense a merchant might have would be the cost of turning on their EMV's NFC functionality and employee training.
However, these costs would likely be offset by improved security and efficiency, via such benefits as electronic receipts, potentially faster checkouts, decreased fraud (and therefore decreased chargebacks) and increased customer satisfaction.
Speaking of consumers, the concept of convenience parity is often discussed. After all, swiping plastic isn't broken. For Apple Pay to ignite, it will need to provide consumers with a process that is at least as convenient, and preferably more convenient, than the status quo.
And yet what most industry pundits forget to discuss is the relative inconvenience of the soon-to-be new status quo, EMV cards. Rather than the ubiquitous swipe that we're all used to, consumers will need to â€œdipâ€ their EMV cards into the card reader and wait for the transaction to process, a relatively cumbersome process that takes more time than consumers are used to with card payments. With the industry's mandated tradeoff of convenience for security, consumers may flock to the relative ease of Apple Pay's NFC technology once the EMV rollout has taken place.
Meanwhile, other precedents for a wallet-less payment experience do exist in the market. The Starbucks app is a particular standout.
What Starbucks has that Apple Pay doesn't yet is a rewards program that offers customers special points for using the app. Make no mistake, this is an important difference. Consumers covet loyalty programs. And although they can still collect their regular card rewards when using Apple Pay, there is no incentive program to specifically reward them for using Apple Pay. But let's not get ahead of ourselves. Just because Apple Pay doesn't offer such a program now doesn't mean it won't ever be incorporated. (Remember how we spoke at the top of anticipating currents?)
Ultimately, though, I believe the consumer-convenience argument translates into a powerful incentive for merchants. In today's age of internet shopping, brick-and-mortar merchants are looking for ways to engage with and improve the customer experience. If Apple Pay makes life easier for their customers, you can bet merchants will jump on the ability to provide that extra differentiation and customer satisfaction.
Apple has entered the digital-wallet game and is poised to outpace its competition, not by providing alternatives to existing solutions, but by embracing the payments industry and upping the ante on security and providing what every consumer values: ultra-convenience. The question shouldn't be whether Apple Pay will ever ignite. Rather, it should be, what opportunities do Apple Pay and NFC technology present for the future of our industry?
Jeff Thorness is chief executive of Forte Payment Systems, Allen, Texas.