Pay is likely to come to Australia but can Apple dominate m-payments?Announced alongside the new NFC-ready iPhones, Apple Pay lets millions of iPhone 6 and 6 Plus owners pay for items in-store and online by swiping their mobile while placing a finger on the iPhone’s Touch ID home button at NFC terminals, or iPhone 5s an 5C owners when paired with the Apple Watch. 

Apple say it will revolutionise the mobile payments worlds classed as “easy, secure” way to pay and works with the new iPhone 6, 6 Plus and Watch through NFC antenna, a Secure Element chip, and Touch ID.

The giant also holds customer data on more than 800 million iTunes accounts – the majority of which have credit cards associated to them. Apple are hoping to revolutionise retail and online payments with its new system, which effectively does away with a credit card. 

But it needs to get retailers on board first.

It will be first introduced in the US and supports credit and debit cards from American Express, MasterCard and Visa. 
Various US banks and retailers are already on board, including Bloomingdales, Macy’s, McDonald’s, Sephora, Whole Foods Market and over 220,000 merchant locations.

But Shell have gone with a different system globally, which could have an influence on Woolworths petrol stations here, with mass US retailers WalMart and Best Buy boycotting the service, too, advocating their own payment systems.

Apple Australia has no local information on how the payments system would be implemented, if at all, in Australia, where NFC payments are already in play amongst all the main banks.

Local retailers, too, are staying schtum on adaptation of the service. There is no confirmation it will come to Australia yet although Apple did say it is “working hard to bring Apple pay to more countries”.

The move by Apple is the tech giant’s bid to get a piece of the new mobile wallet industry, which Google has already entered with Google Wallet, with reports saying Apple gets 15c for every $100 transacted through Apple Pay. 

Analysts believe Apple has an advantage in the race for mobile commerce and payments dominance thanks to security features of Apple Pay and iPhone 6, alongside detailed customer payment data it holds, key partnerships with card networks and merchants.

Since the tech giant is sitting on such a massive pile of cash, some also think Apple may be about to become a banking institution, of sorts.

How it works

Users can add their credit or debit card on file from their iTunes Store account. The actual card numbers are not stored on the device nor on servers – a unique Device Account Number is stored in the device.

Each transaction is authorised with a one-time unique number and Apple Pay creates a dynamic security code to validate each transaction. CEO Tim Cook placed strong emphasis on its secure element. The m-payments system effectively does away with the magnetic strip on the back of cards, replaced by swiping.

Commonwealth Bank “are examining the details of the announcement including the newly released features of the phone,” a spokesman told CN.

“As we have always done, we will announce any future enhancements to our applications when they are ready for customers” but didn’t have any more information it could share at this time. 

Commonwealth Bank, one of Australia’s largest banks, currently offers NFC payments via PayTag for compatible iPhone and Android phones.

Death of Credit Card?

Telsyte analyst Rodney Gedda believes new mobile payments options doesn’t mean the death of the credit card.

Apple Pay will complement cash and credit cards, but you still need a payment gateway so it won’t eliminate the financial institution or bank. “Its just another payment option for consumers,” but says its “an exciting time for mobile commerce.”

Apple is simply offering is the missing link in the mobile payment system – a mass market device that processes payments “seamlessly.”

Pay will be compatible with existing NFC terminals, so there won’t be special Apple terminals, which makes it easier for retailers to adopt. Apple’s iBeacon technology will allow merchants to personalise in-store experiences and prevent fraud by using customers’ location.

Gedda predicts Pay will be introduced in Australia, eventually, and will be a catalyst for paying via smartphone.

Merchants and retailers will want to support Apple due to their market dominance, he believes.

Apple resellers and telcos are likely to take up the system early.

Telcos could also be “important channel” for the system and could up-sell other services like device management platform and protection systems for business customers.

However, there are also issues with relying solely on an electronic device as a form of payment – if the iPhone battery goes dead, then a payment can’t be made, he notes.

Apple itself also stands also make wad loads of cash from Pay – it will take 0.015% of every payment transaction and is said to have negotiated a large slice of each transaction from banks and payment companies according to Financial Times, and will likely pass on the savings to merchants in the form of lower transaction fees, analysts believe.

Starting in October, with iPhone 6 and iPhone 6 Plus, Apple Pay will be available in the US as a free update to iOS 8.NFC payments are less common in the US, so it will be interesting how widely the system is adopted when it goes live next month – just in time for the mass switch to chip-and-PIN there.

The giant is also working to extend the service 200 million owners of older model iPhone 5, 5c and 5s.

Analyst Enrique Velasco-Castillo from Analysys Mason says “Apple has an advantage in the race for mobile commerce and payments dominance thanks to security features in the iPhone 6 and the Apple Watch, detailed customer data, key partnerships with card networks and merchants, and sheer good timing.”

Cupertino are also reassuring consumers of the safety of paying with a mobile. 

“Apple doesn’t collect your purchase history, so we don’t know what you bought, where you bought it or how much you paid for it,” said Eddy Cue, Apple’s senior vice president of Internet Software and Services.

“And if your iPhone is lost or stolen, you can use Find My iPhone to quickly suspend payments from that device.”
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