Apple Pay changed the rules in the U.K., but is it enough to win?
Apple Pay's recent move to waive the £30 contactless transaction limit in the U.K. removes one of the key restraints it faced when competing with credit and debit cards at the checkout. But at this point in the mobile wallet adoption cycle, does this change really matter to consumers and merchants?
An overdue update. The limit of £30 for contactless transactions in the U.K. stems from contactless card transactions that were accepted without PIN or signature and therefore at higher risk of fraud. Since mobile wallets typically use robust authentication of the end user such as fingerprint detection, the case for capping transactions seems obsolete. With earlier fraud concerns surrounding Apple Pay enrollment now alleviated, the company is in a good place to expand its footprint internationally.
Was the limit ever a concern? The case for contactless (both cards and mobile) has been primarily as a more convenient and secure alternative to cash, particularly for low-value transactions. According to the Fed, cash still accounted for 32% of U.S. transactions in 2015. This was down from 40% in 2012, but still larger than any other payment mechanism. Cash is universally accepted and trusted — elements that mobile payment players are striving hard to compete with.
Competitive pressure. Apple Pay enjoyed a healthy lead over its rivals in the U.K., but with this month's introduction of Samsung Pay in the U.K. market, it was time for the gloves to come off. Samsung's pitch has always been about widespread acceptance; its technology enables phones to simulate the signal of a swiped magstripe card, allowing its wallet to work at nearly any terminal with or without NFC. This might be less of a killer app in the U.K., where EMV is more mature than in the U.S., but it also makes Apple Pay's limitations all the more glaring. That said, Samsung Pay is also unrestrained by the £30 transaction limit, so the removal on Apple's part merely levels the playing field.
A loyalty play. The removal of the £30 transaction limit also enables Apple to get a fuller view of its users' shopping habits. This, in turn, provides valuable data to loyalty programs. All of the major digital wallet schemes are working hard to index retailer loyalty and rewards to their apps, allowing for ‘single tap’ payment and point collection. Samsung Pay goes one step further with their own loyalty platform to drive adoption — another factor that pressures Apple to respond to any encroachment Samsung makes on its coverage map.