APPLE PAY

AND MOBILE PAYMENT

ACCEPTANCE
Vishal Kanvaty Domain Head
Ujwal Tamminedi Senior Business Analyst

Contents
What is Apple Pay? ................................................................................................................................ 2
In Apples Words!! .................................................................................................................................. 2
Why Apple Pay Is Not A Technology Breakthrough? ..................................................................... 2
Why Has NFC Not Been Successful ................................................................................................ 2-3
Why Apple Pay Is A Mobile Payment Breakthrough? ...................................................................... 3
Some Standout Features ....................................................................................................................... 4
Possible Pain Points ............................................................................................................................... 4
Conclusion ............................................................................................................................................... 5
ABOUT US ................................................................................................................................................ 5

APPLE PAY And MOBILE PAYMENT Acceptance

What is Apple Pay?

Apple Inc. (AAPL) introduced new iPhones
on 9th September 2014 featuring mobile
payments. It is termed as Apple Pay.

In Apples Words!!
Gone are the days of searching for your
wallet. The wasted moments finding the
right card. The swiping and waiting. Now
payments happen with a single touch.
Apple Pay will change how you pay with
breakthrough contactless payment
technology and unique security features
built right into the devices you have with
you every day. So you can use your iPhone
6 to pay in an easy, secure, and private
way.

Why Apple Pay Is Not

A Technology
Breakthrough?
It is a typical mobile wallet which uses
tokenization and NFC technology.
Tokenization - Eliminating payment data
from your network is the best way to help
ensure that your customer's sensitive
payment information is safe. This is
achieved by tokenization. The acquirer
processor replaces the sensitive payment
data with a unique identifier that cannot be
mathematically reversed. This token is used
as the mode of closing the transaction over
the network.
This is a technology already used in chip
and pin EMV credit cards, hence it requires
minimal system changes.
NFC Technology - Near-field (or nearfield)
communication (NFC) is a set of standards
for smartphones and other mobile devices
to establish radio-communication with

APPLE PAY And MOBILE PAYMENT Acceptance

each other by touching them together or

bringing them into close proximity, usually
no more than a few centimeters.
Applications of NFC include contactless
transactions, data exchange, and simplified
setup of more complex communications
such as Wi-Fi. Communication is also
possible between an NFC device and an
unpowered NFC chip.

Why Has NFC Not

Been Successful?
In terms of technology the solution already
exists and is not a new breakthrough
innovation. Long before Apple introduced
Apple Pay, Google already had a mobile
based payment solution called Google
Wallet, a similar technology being used by
Android phone users to pay for goods at
retailers such as McDonald's, Walgreens
and 7-Eleven. Google Wallet like Apple Pay
uses NFC to communicate from mobile to
terminal, post which it is the normal card
ecosystem that takes care of the
transaction. However Google Wallet and
various similar solutions like Isis Wallet have
not been successful.
The reason for failure is that customers,
merchants and banks have been skeptical
about NFC, the technology which forms
the basis of mobile payments at point of
sale. There was no viable business model
for merchants or banks to push for NFC in
any way. It was the typical chicken and egg
problem. To highlight:
Customers did not adopt the NFC
technology enthusiastically due to
concerns over security and habitual
use of plastic.
Merchants require replacement or
upgrade of their terminals for
supporting NFC transactions which is

associated with a cost which the

merchants were unwilling to pay due
to low acceptance of NFC.
Issuing banks were not keen, given it
provided no extra benefit in terms of
revenue to them and while they had
to bear the extra cost of processing.

Why Apple Pay Is A

Mobile Payment
Breakthrough?
However as with any other Apple initiative
there are two aspects that make this launch
standout :

Apple Pay at their partner acquirer

terminals and not lose volume to
competition.
Apple can leverage its prospective and loyal
customer base to adopt the payment
method because of its brand and market
influence. Apple Pay appears so attractive
because Apple already has massive market
to tap into, with a direct connection to 800
million users who have already connected
their debit and credit cards to their iTunes
accounts. Apple Pay is also not out to
compete with banks and companies
offering payment services. Instead, it's
seeking collaborative relationships. It aims
to become a dominant player, yes, but not
necessarily by disrupting existing setups.

An ecosystem which has already been

created by Apple before the launch by tying
up with merchants, card associations and
issuing banks. Apple created an ecosystem
where :
a. It tied up with major merchants such as
Bloomingdales Inc., Macys Inc.,
McDonalds Corp. , Sephora USA Inc.,
Subway Restaurants Inc., Walgreen Co.,
Whole Foods Market Inc. etc. Merchants
see an obvious benefit by tying up with
Apple given its customer base and will
enable their terminals with NFC which they
were reluctant to do earlier.
b. It tied up with issuing banks, who in an
attempt to retain or capture market will tie
up with Apple. According to Apple it has
tied up with Bank of America Corp., Capital
One Financial Corp., JPMorgan Chase &
Co., Citigroup Inc., Wells Fargo & Co. and
other banks, representing 83 percent of
credit-card purchase volume in the U.S.
c. It tied up with associations VISA,
Mastercard and Amex who want to support

APPLE PAY And MOBILE PAYMENT Acceptance

Some Standout
Features
Apple will have no access to the user's
information and transaction details.
Retailers too will not have access to
their customer information. The user's
credit card information will be
installed in a secure element which
keeps it independent of any software
on the mobile device. Also as a
hardware protection the secure
element shuts down if there is any
physical tampering.
Security has been made the key stone
for Apple Pay. Besides the NFC and
secure element, biometric
authentication is enabled using Touch
ID. This prevents payments from being
made by unauthorized person.
In case of lost phone, the wallet can
be disabled immediately by accessing
the My iPhone App. Hence the usual
hassle of calling up issuer in case of
lost plastic card is eliminated.

Unlike Google Wallet which works on

previous versions of Android, Apple
Pay as of now works only on iPhone 6
and iPhone 6 Plus. Hence Apple Pay
can be only used by new Apple
customers and not existing ones.
With recent Apple cloud hack
consumers have become more
skeptical towards privacy of
information on mobile technology and
the same will extend to Apple Pay.
While Apple Pay is more secure than
previous NFC implementations, it is
not necessarily how the consumers
will perceive.
Apple has not provided NFC APIs in
the latest IOS and hence NFC
capabilities are limited to Apple Pay.
Additional functionalities hence
cannot be added.
NFC business model is still not a
sound business model. Today Banks
take extra cost on processing of NFC
transactions and this does not change
in any way with Apple Pay.

Possible Pain Points

Infrastructure for Apple Pay is yet to
be ready. New point-of-sale systems
will have to be adopted and that takes
time. Upgrades can be expedited,
most especially by bigger retailers, but
it's likely that many will also drag the
process out until kinks have been
worked out.
Also, adoption will take time.
Consumers are creatures of habit.
Years of card use are deeply ingrained
so it's possible it may take years before
consumers stop whipping out their
wallets to get their cards.

APPLE PAY And MOBILE PAYMENT Acceptance

Conclusion
Hence all in all Apple has ensured that the
reluctance by customers, merchants and
issuers is overcome by providing an
acceptance infrastructure which will
benefit all. However reservations still exist
and need to be effectively handled by
Apple for success of mobile payments
using Apple Pay.

About Us
Altimetrik today is a rapidly growing
organization with more than 2,500
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Headquartered in Southfield Michigan, USA,
Altimetrik has offices in San Francisco, New
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Today, user experience is driving business.
Organizations have many ideas to deliver a
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APPLE PAY And MOBILE PAYMENT Acceptance

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www.altimetrik.com

APPLE PAY And MOBILE PAYMENT Acceptance