After ten months of waiting, Apple Pay has gone live in the UK. From today, iPhone 6 and Apple Watch users can use their devices to pay in-store, in-App, at London Underground ticket gates and on London’s buses. So is this the start of a British mobile payments revolution?
Yes it is…. but it will be slow burn revolution. The UK is in many ways significantly better prepared for Apple Pay’s arrival than the original launch territory of the US. It boasts widely deployed contactless acceptance infrastructure, contactless payments on London’s transport system and rapidly increasing levels of consumer awareness and adoption. In spite of this, a number of challenges remain for Apple Pay – and in some cases its imminent competitors (Check out our recent Mobile Payments and Banking and Retail Payments Market Maps for a reminder of these). Here are four :
Challenge 1: UK banks are taking their time
Today’s launch is limited to 5 major banks (Natwest, Nationwide, RBS, Ulster Bank and Santander). Together, these account for around 35% of active current account market share. Three big names accounting for most of the rest are absent from today’s launch list:
- HSBC, which until yesterday was expected to join today’s launch party, has delayed at the last minute. This is a little unfortunate as the Apple Pay UK website shows HSBC cards in its example set up shots! HSBC is however reported to be working hard to be up and running by the end of July.
- Barclays, a previous Apple Pay absentee, that last week announced its support for competing platform Zapp, will support the service at an unspecified time in the future.
- Lloyds Banking Group – will be on board in the Autumn.
Is this slow start indicative of reticence on the part of the banks, or just the time it takes to launch a new service? There has been discussion that the business model Apple imposed in the US is much less attractive for European issuers working with lower and decreasing, EU regulated, interchange levels. However by late 2015 most iPhone 6 owning retail bank customers will be able add their cards to their Passbook wallets and even if banks have mixed feelings, Apple device owners are a pretty savvy lot and probably don’t need their banks to persuade them to try the service.
Challenge 2: Don’t leave your wallet at home (yet)
The list of launch retailers includes many of the UK’s leading high street names and Apple Pay is immediately usable at 250,000 contactless terminal equipped retail locations. However, aspiring Apple Pay users will not yet be able to leave their cards and wallets at home. The default transaction limit at most UK retailers is currently the standard un-authenticated contactless card value of £20 (although this will be raised to £30 in September). Some of the leading launch retailers have their terminals already configured to accept higher value, TouchID authenticated transactions. According to Visa Europe’s press release, this restriction will be fairly swiftly removed with 80% of terminals updated to accept higher value payments by the end of the year.
Challenge 3: UK Consumers might not trust Apple with their money
A recent survey of on-line iPhone users by Forrester indicates that only 27% would trust Apple as a mobile wallet provider – significantly less than the scores for PayPal and banks. Trust is an important factor for consumers when it comes to payments choice and, in spite of pretty good coverage of security in the launch press coverage, Apple may have a challenge to really build and maintain it amongst consumers long term.
Challenge 4: Convenience benefits are limited
Convenience is another key consumer payments driver. Contactless cards offer a step change improvement in speed and simplicity vs. cash and chip and pin at point of sale. So can Apple Pay offer an even better experience?
For the last few months I have been using my Vodafone wallet equipped phone and a Barclays bPay wrist band – as well as a card – to make low value contactless payments and use the Tube. The wearable is great – especially at underground ticket gates and offers real advantages of not having to take out a wallet – or phone. Use of Touch ID rather than PIN is marginally easier but the relative convenience factor of mobile versus contactless card is less clear. This will remain the case until acceptance is ubiquitous.
Of course the final point to bear in mind is that iPhone 6 only accounts for a relatively small share of installed base of UK smart phones.
All of this being said, Apple Pay will raise awareness of, and expectations for, mobile payments amongst consumers and merchants. This can only help ahead of the launches of Zapp, Samsung Pay, Android Pay and bank branded HCE enabled schemes that are lined up ahead of us and will bring mobile payments choice to Android users and banks, merchants and consumers wanting an alternative to Apple.
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