Apple Pay and the Future of Contactless Payment

Apple Pay and the Future of Contactless Payment

By Michael McEnaney - December 10, 2014

Not unlike so many other things launched by Apple over the years, Apple Pay has garnered its share of headlines, favorable and unfavorable.

While it might be too early to weigh in on Apple’s entry into the world of contactless payment, it’s worth a closer look to ascertain where things stand at this point in the cutting edge world of near field communications (NFC) technology.

According to online researcher firm comScore, approximately 220,000 U.S. retailers have the capacity to handle NFC, where smartphones or similar devices establish contact by touching or being brought in close proximity to each other. That’s 220,000 out of a universe of some 9 million merchants, so mass adoption of this payment method is still likely to be years away.

As of October 2015, merchants that do not support EMV credit cards -- the new smart cards with integrated circuits that enable point of sale authentication and help prevent fraud -- will be held liable for the fraudulent use of counterfeit, lost, and stolen cards.

These new EVM cards will be read at the point of sale by inserting the end of the card featuring the chip into a payment terminal, rather than swiping the familiar magnetic stripe on the back of the card. The consumer will then enter a PIN to authorize the transaction.

The idea here is that these new EMV cards are significantly more difficult to counterfeit than “standard” credit cards. The research firm Aite Group estimates that only about 14 percent of U.S. retailers currently support this technology -- and a smaller percentage of consumer’s credit cards already incorporate such chips. These numbers are expected to increase rapidly throughout 2015, as most of Europe has successfully embraced this technology and the rest of the world is following. Both MasterCard and Visa are reportedly pushing aggressively for its adoption here in the U.S.

In Tune With Apple?

Timing is everything, the expression goes, and Apple’s appears to be pretty good on Apple Pay. The company’s competitors, however, have learned to be nimble as well. Apple’s new payment system is facing spirited competition, notably from a recently formed retail consortium (Walmart, Gap, Rite Aid and CVS, among others) called Merchant Customer Exchange, or MCX, that has created an app called CurrentC.

The most obvious appeal of CurrentC is that it connects directly to users’ checking accounts, which cuts out the middlemen -- namely, the credit card companies and their fees. This is a big deal for retailers of all sizes. One drawback is that the app relies on scanning Quick Response codes at the checkout counter, which isn’t exactly cutting edge tech for today’s consumers when compared to Apple Pay’s much easier (and more hip) simple wave of the iPhone.

Toss in recent computer vision start-up Jumio’s new product dubbed BAM Checkout, also aimed at improving the mobile checkout experience for consumers, and it’s safe to assume these waters will get even muddier in the months ahead.

The ultimate decision for retailers when it comes to the future of contactless payment boils down to this question: Do you cede some control to Apple and assume that systems like Apple Pay will lead to more sales as this technology gains steam and comfortability with consumers? Or do you follow the CurrentC train in an effort to gain on the savings from cutting out credit card transaction fees?

And although Apple enjoys a dominant market share here in the U.S., what about all those Android aficionados out there? The aforementioned Jumio solution is indeed cross-platform ready. Ultimately, the lesson for retailers may simply be that, like so many choices that involve your bottom line today, the consumer might already be making this decision for you. 

Michael McEnaney has been a technology journalist for over 20 years covering consumer electronics and imaging tech as well as launching, editing/writing content, selling and marketing a variety of tech publications and websites during that time.

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