Why Apple Pay needs to represent more than a payments service in the UK to tap contactless market
Apple Pay makes its UK bow today (14 June) and if the service is to convince people to ditch their tattered wallets then it will need to be marketed as more than just a payment service.
Banks, shops and restaurants at more than 250,000 locations will now let people tap and pay with their iPhones. It is that ability to pay for anything anywhere - physical or digital - with the touch of a thumb that Apple will be hoping sets Apple Pay apart from the current crop of mobile payment services.
Landing this message may be the company’s most challenging move yet. More than a quarter (27 per cent) of UK iPhone owners trust Apple to launch a mobile wallet though they are more trusting of Paypal (43 per cent), a bank (41 per cent) a credit card network (40 per cent), and Amazon (32 per cent), according to Forrester.
The lack of trust is compounded by the fact that Apple Pay relies on near-field communications (NFC) technology, which limits the scope of its usage for retailers as they have to support NFC terminals. Apple needs merchants more than retailers need Apple Pay so it will need to work with the flock of UK brands already signed up to demonstrate the added value it will bring to their customers and ultimately their businesses.
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Some telecommunications experts have said the additional value could come from people seeing Apple Pay as a safer way to purchase products than with their cards. The technology giant does not store credit or debit card data on its servers, which means details are less likely to be stolen.
Early momentum could live and die by how much launch partners like Wagamama and Transport for London (TfL) buy into this promise and choose to promote Apple Pay to their customers. A quick scan of some of the communications from Apple Pay’s backers go to great lengths to stress its convenience and security credentials though interestingly some have also pointed out that it is just one strand of a mobile commerce strategy that will likely encompass Android and other platforms too.
It is why the company plans to make coupon redemption, loyalty and ticketing functionality a bigger part of the Apple Pay offering, which in turn would lower the barrier to transact on mobile. Apple chief executive Tim Cook has said over and over again that the business does not monetise user data and so the aim will be to get as many people reliant on the service so that they are less willing to want to switch to a rival device.
“To stand out in an already crowded market, new entrants should provide more than just a payments service. Many retailers don’t see a benefit in Apple Pay because they want a solution that will help them create an omni-channel sales offering, engage better with their customers and understand their shopping habits,” said Dan Wagner, ecommerce chief executive of Powa Technologies.
His comments refer to Apple Pay’s status in the US where retailers have given it a frosty reception since its debut last October. Out of America’s 98 biggest brick-and-mortar retailers, nearly two thirds told Reuters recently they had no plans to back Apple Pay this year, while 4 per cent planned to accept it before the end of the year. Many of the retailers surveyed cited the lack of consumer demand for the service, which is only available to iPhone 6, 6 Plus or Apple Watch users, as a potential barrier for them adopting it within their stores.
That said, many industry observers predict the UK will prove a happier hunting ground for Apple’s mobile commerce charge. Indeed, Forrester vice president and principal analyst Thomas Husson claimed that Apple Pay’s adoption in the UK would be faster than in the US. In a recent blog post he his reasons why including a more mature contactless infrastructure, TfL’s involvement from launch, the dearth of rival services from retailers as well as a larger install base of compatible devices.
Emma Crowe, chief of client strategy at mobile marketing specialists Somo, said: "While Apple isn’t first to market, it is first to enable UK consumers to pay via their mobile (without the need for a sticker) through contactless terminals. As we’ve seen time and again, it takes Apple entering a market to produce a real, fluid, customer experience. Apple has the industry and consumer clout, the trust, reach and the right consumer base to make mobile payments a success.
“However, competition will still be fierce. The banking giant, Barclays, is preparing to take Apple head on with their suite of contactless payment tools - a sticker, a keyfob and a wristband.”
There has been much talk from operators and banks about mobile payments but no real scaleable solution. The launches of Apple Pay, Android Pay and Samsung Pay as well as services from the likes of Paypal and several banking companies suggest companies think consumers are ready to be convinced to pull out their phone to pay at the till.