December 11, 2018

After a billion ApplePay transactions, what have we learnt about best practice in mobile payments?

SMART Payments series – Blog 6

Apple doesn’t release official figures. But earlier this year, CEO Tim Cook told professional Apple watchers that the total number of ApplePay transactions had passed the 1 billon mark in the third quarter of 2018. That’s at least 10.98 million transactions every single day – topping both PayPal and Square during the same period.

So while we wait to see whether ApplePay has surpassed itself in the fourth quarter of the year, let’s look at what we can learn from Apple’s story.

1: It helps to have a consumer brand that customers already recognise and trust. Apple Pay’s estimated 252 million users account for about 31 per cent of the active installed iPhone base (up from 25 per cent in 2017). It may be losing share to Samsung, but Apple has its devotees around the world. There’s a similar consumer-tech link happening in China, although with different technology types. AliPay dominates, largely thanks to combining payments with the country’s favourite social media platforms. The big picture here is how mobile payments slot into existing consumer technology and people’s pre-established habits.

2: Choose your market wisely. ApplePay is currently available in 20 countries worldwide (with Germany joining the gang sometime in 2019), but its home market – the US – accounts for only 15 per cent of total transactions. That feels counterintuitive for the world’s largest economy, until you consider the fragmented nature of the payments market in the US. As we discussed in this white paper, fragmentation can cause markets to bloom and stagnate at the same time.

The point here is that each market has its own cultural norms, historical perspectives, and infrastructure – and these tip the balance for certain mobile payment types. Take mobile wallet adoption rates, which are much higher in Asia Pacific markets than in Europe, Canada and the US. That’s mainly because Western consumers are so familiar with card payments and POS terminals that there is no real reason or urgency to adopt mobile payments. It will be interesting to see what happens to ApplePay in Germany – another counterintuitive market that is notably resistant to the cashless trend.

3: Consider your broader ecosystem. When it launched, ApplePay brought together all the key elements at one time. Tokenisation and hardware biometrics created a payment device that is more secure than contactless cards and faster than chip and PIN. Apple also developed close relationships with telcos and retailers who were also trying to establish their own, rival, payment schemes. In doing so it overcame one of the biggest barriers to early mobile payments. With other similar schemes falling at a number of these hurdles, ApplePay established itself as the go-to at launch.

4: Don’t rest on your laurels. The move to mobile-initiated payments can be seen in all payment markets. ApplePay has achieved extraordinary momentum in the four years since its launch, but new technologies are coming to market all the time. Merchants want proven bridging technologies like HCE NFC, 1D-barcodes, QR-codes, Bluetooth Low Energy (BLE) to connect payment services with any type of checkout. Consumers want connected mobile devices so they can shop in-store, in-app and online in a single ‘customer journey.’ Form-factor is becoming less and less important and in these highly disruptive times, new providers will crop up to meet demand.

And that’s probably the biggest takeaway from the Apple story. It pretty much stood alone at launch, and now it doesn’t. What happens next is an ongoing question. As we’ve seen, there’s no universal path to mobile payments. Existing infrastructures can get leap-frogged – which means every participant in the market needs a digital strategy. And everyone needs flexible infrastructure and open platforms so they can respond to whatever comes next.

– Emmanuel Falzon, Account Manager, RS2

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