Apple Pay has launched in the U.K, and the pending launch of Samsung Pay in the U.S. and recently launched Android Pay are causing considerable buzz.
Such developments are met with as much excitement, the fact that they are dipping their toe in the payments space is certainly an interesting discussion point. But beyond the initial novelty factor, do these mobile technologies hold real business potential?
The real issue will be whether Apple and its tech giant competitors have the patience and inclination to play the long game, particularly in the EU. These tech players will see their share of transaction value from the banks significantly reduced in Europe, compared to the US, due to the huge discrepancy in interchange fees across the two continents. This December in the U.K. and the rest of the EU, new laws are set to reduce the interchange fee to 0.3% for credit and 0.2% for debit transactions. This will equate to 300-500% less than the revenue that issuing banks in the US are able to share with partners like Apple.
Will Apple and its competitors be willing to put the time and effort required into seeing their solutions take off in this market, when the commercial opportunity is reduced? Only time will tell.
Samsung, Google and Apple – these are all brands that consumers know and trust, and with their reputations for gaining deep insight into the demands of their customers, I have no doubt that they have the means to create a solution that suits today's payment demands. That said, seeing a payments solution through to mass adoption takes persistence and a helpful dose of patience - not something these restless innovators are best known for. The real judge will be whether these tech giants see enough business potential in this market to stick with it.
While there is no doubt that the likes of Apple, Google and Samsung are the masters of cool technology, they are nonetheless new entrants to this long-established market. Mobile has a clear future in the payments space, but it will likely take a lot longer to reach mainstream acceptance than many excited tech fans anticipate.
In my experience, innovations in the payments space take a number of years to reach mass adoption. Back in 1997, while working for Visa, I was involved in the development of the card provider’s contactless payment strategy. It has taken until now for this technology to reach widespread uptake – nearly 20 years since the planning phase.
When it comes to payments technology, the ability to solve a specific problem is a key requirement amongst users. Understandably, consumers are wary of new payments technology, thanks to the element of risk they perceive with adopting a new spending process. Twenty years ago, with debit card acceptance still a relatively new innovation, the UK was far from ready to begin ‘tap-and-go’ payments. Similarly, today we are largely happy to continue relying on our cards for payments for now – rather than getting to grips with relatively new mobile technology.
Apple, Google and Samsung are not the first technology leaders to see a clear business opportunity in the payments market. In 2013, telecoms provider EE launched the ‘Cash on Tap’ app, which provided a similar payments function to Apple Pay.
An EE customer myself, I joined a number of early adopters and for a short while enjoyed the novelty factor of making payments via my phone. However, this interest was short lived. With the technology failing to meet a specific need on my part, or solve a specific problem on the part of traditional payments services, I soon reverted back to my debit card. EE can be seen as a prime example of the challenge involved with encouraging consumers to adopt new payments solutions. Two years on, the service still has just 50,000 downloads from the EE's network of 20 million customers and a sorry-looking review rating on Play, with over half of the 1,000 respondents rating the app with just one star.
Regardless of EE's experience, I can say with a degree of certainty that our reliance on mobile means that this is where the future of payments is heading. However, despite what many Apple enthusiasts might say, we are looking at a matter of years before we see mass adoption of mobile payments, rather than months.
Rich Wagner is CEO and founder of Advanced Payment Solutions.