PHOENIX Apple enters the mobile wallet world in a stronger position than most of its rivals, largely because it sought the support of card networks and banks before the first Apple Pay transaction ever took place.
"Preserving the current system was extremely important and a factor that was far different from the others," said Neff Hudson, vice president of emerging channels at USAA.
Hudson discussed the Apple wallet at SourceMedia's PayThink conference, which began on Oct. 20, the first day Apple Pay went live for merchants and consumers. Apple Inc. CEO Tim Cook announced last week that the mobile wallet has more than 500 banks lined up to support it by the end of the year and into early next year.
Apple Pay has drawn much attention from major media outlets, and consumers are far more aware of it than when other mobile wallets made their debuts, Hudson said.
"There are still some major players involved other than Apple, but with Apple here now, we have the other 50% of the market involved," Hudson added. Because Apple Pay operates through Near Field Communication technology, Hudson predicts the Apple wallet will be a major catalyst for driving merchant adoption of NFC at the point of sale.
The payments industry has pushed NFC for years, said Jennifer Miles, president of VeriFone Systems America, in a separate presentation at PayThink. "But Apple Pay is incredibly exciting because we didn't have the consumer behavior or merchant side of the equation for NFC, and Apple Pay solves those problems."
VeriFone has its merchants in a good position to accept NFC payments, as 80% of devices the company has placed in the U.S. are NFC-enabled, Miles said.
"It's been that way for more than a year," she added. "The NFC devices may not be turned on yet, but they are there."
The introduction of Apple Pay at a time when other wireless payment technologies such as Bluetooth Low Energy and Host Card Emulation are also taking hold "makes it feel like a perfect storm," Miles said.
The security of Apple Pay has been one of its key selling points from the start. Apple Pay makes use of the iPhone's TouchID fingerprint scanner, as well as a tokenization system that takes card account data out of merchants' systems.
Consumers will receive what Apple calls a "device account number" as opposed to payment card numbers.
Apple Pay will take the consumer card numbers when the consumer enrolls the card, and will then encrypt them and send it to the card network, said Matt Barr, head of emerging payments in the U.S. for MasterCard.
The card networks send back a token to be stored on the phone's secure element, Barr said. No card data is ever on the phone or in an Apple vault.
But consumer habit will remain a tough nut to crack for any mobile wallet.
"Swiping a payment card is still very easy, so it is still going to take a couple of years for mobile wallets to take hold," Hudson said.