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Apple Pay launches today. We’ve heard a lot of talk about this new NFC-enabled mobile shopping option from Apple. But others have tried to sell consumers on the digital wallet idea before and boldly failed.
If Apple wants us to trade in our wallets once and for all, Apple Pay will need to win on these five fronts:
1. Third Party Adoption
The first step is adoption. A year from now, to what extent will third parties and businesses have adopted Apple Pay? With new technologies, there is often a “chicken and egg” dilemma: Consumers won’t use it if their favorite businesses won’t, but businesses don’t want to spend time and money to adopt new processes if there isn’t interest from their customers.
Third parties include payments processors, who will play an important role in better enabling Apple’s technology. If consumer demand is high but processors don’t see the value in it, businesses can’t provide it as a payment option, and that will be the final nail in Apple Pay’s coffin.
Payments processors and hardware manufacturers need to take the necessary steps now to become an approved Apple Pay processor: preparing for the impending EMV (Europay, MasterCard, and Visa) or “chip-and-pin” standard, building payment terminals that work with both EMV and NFC technology, and even providing software development kits (SDKs) so that developers can integrate Apple Pay into their own solutions. All of these measures will mitigate the cost for businesses and retailers to implement Apple Pay.
2. Consumer Adoption
Again, it is the consumer that will primarily drive mass adoption by demanding it of businesses. Apple is at an advantage with the iTunes Store, one of the largest repositories of consumer credit card information in the world. Linking Apple Pay to users’ iTunes accounts is like giving buyers a wallet with an approved credit card already inside.
But even with the technology there, Apple is faced with the daunting challenge of convincing people they can leave their wallets at home and rely on their iPhones and Apple Watches for payments. Consumer habits are not easily changed, even by a company with as ravenous a fan base as Apple. Only when Apple Pay is able to take the place of traditional forms of payment will widespread user adoption be considered a success.
Just days after Apple Pay was first unveiled, PayPal took out a series of print and TV ads thumbing its nose at Apple and the infamous iCloud security issue that led to nude celebrity photos being leaked. “[We] want our money safer than our selfies,” PayPal not so subtly argued; so it’s no surprise that Apple Pay’s security features will be a strong determinant of the technology’s success one year from now.
Apple promises to tokenize users’ card numbers already on file with iTunes to minimize the risk of a data breach, but the company will have to employ advanced fraud protection best practices such as point-to-point encryption and secure vaulting. These comprehensive security features will not only minimize any points of weakness among the retailers, card companies, and banks but will ensure safer EMV and NFC-based payments.
4. Omnichannel Capabilities
The rule of omnichannel payments is simple: Be where your customers are. Businesses should enable payment methods of their customers’ choosing, in the channels their customers want to shop in. As it stands, Apple Pay is not a multichannel solution. If customers are making in-store purchases, then Apple Pay is a solid choice. But if a customer wants to make an online purchase, is Apple Pay going to be there? The company has not yet solved for omnichannel payments, but that is likely where Apple is going.
With iTunes, Apple already has the means to make a seamless transition to in-store, online, and mobile payments. The ability to store the same credit card token from Apple Pay in iCloud will not only enable online payments but will set the technology up for long-term success.
5. Customer Service
Customers disputing purchases made with Apple Pay will face an uphill battle if customer service is not factored into the platform. What technology, if any, will allow retailers to look up the token Apple creates at the point of sale and match it to the actual credit card and cardholder? When a retailer tells a customer “I don’t know how to look up your info and verify that you made this purchase,” that customer is going to be discouraged from ever using Apple Pay.
Sure, a business owner can call a technologist at Apple or the payment provider, but can businesses answer customers’ questions at the point of sale? What are those questions and concerns even going to be? Apple will need to help retailers anticipate and address those friction points in real-time.
Apple Pay will face tremendous scrutiny in its first year. When we look back a year from now, how widespread will business and user adoption be? How many security breaches and customer service horror stories will we have read about? Most importantly, will Apple have taken the necessary steps to become an e-commerce solution and finally bring omnichannel payments into the mainstream?
Identifying and holding Apple to these five metrics now is the first step to creating a new level of ubiquity in payments acceptance for merchants, processors and customers alike. The industry needs a push, and Apple Pay might just be the technology to do it. The clock starts today.
Nish Modi is Senior Vice President of Product and Innovation at SecureNet.
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