Apple mobile payment system: practical use and development prospects

Hi, Habr! Given the specialization of PayOnline (acceptance of payments in mobile applications and on websites), we would like to continue the cycle of publications that tell about the integration of one of the largest corporations in the IT industry, Apple, into the payment industry. You can familiarize yourself with the previous materials here and here . Today we will show a sketch from the life of an advanced American showing the advantages of the Apple Pay mobile payment system and reflect on the global prospects of the new Apple Corporation project.



Let's start with the translation of an entertaining story from the life of the blogger and lover of modern technology Nate Swanner. This sketch clearly shows the usability of the Apple Pay technology and at the same time indicates that not many people know about the existence of new items.



Issue 1: Mobile NFC payments market: key players, current situation and future prospects

Issue 2: The future of p2p payments: when the smartphone replaces cash

Issue 3: Apple's mobile payment system: practical use and development prospects

Issue 4: Apple Pay will be available on mobile websites, and will also be fully launched in Russia by the end of this year.

Issue 5: How does Apple Pay affect the payment industry?

Release 6: Starbucks Mobile Payment Success Secrets

Issue 7: This fall Apple Pay will be available in Russia, Japan and New Zealand

Hero of the Day: The Wonders of Using Apple Pay

Yesterday I wanted sushi. It was a tiny place in a large shopping center, but the food there was on the level.

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While we were waiting for a table, I noticed that the restaurant was now starting to accept Apple Pay . I learned about this from an inscription on a small self-made cardboard sign. Incredibly cute carton also offered to open Pay Finders and see if our establishment was marked in the service.



Since he was not there, I added him.



After a quick snack, we went to the cashier to pay. A couple standing in front of us paid with a credit card - the one with the chip. This is where the fun begins.



For them, it was a ritual. It consisted of attempts to hold a card in the terminal and around it and ended up with a long, about 10 seconds (which is not so long, of course, if you don’t want to quickly pay off and dump) a pause caused by the system’s attempts to process the payment.



Note: my European colleagues always point out that cards with EMV chips always work “excellent” in Europe. I do not care. In the states, they work sucks.



The pause was accompanied by an awkward silence, impatient stomping feet and uncomfortable glances that all those present threw at the culprits of waiting. I felt sorry for them. Imagine an entire establishment and a full queue of people who want to sit at the table (and with them the cashier), who were so clumsily delayed by the processing of the payment on the card. Finally, she ended, and the couple hurried to leave the institution.



Next, I come up, give away a handwritten account, which lists everything that we devoured, and pull out my phone. The cashier makes some of his own manipulations, and then informs me that, if desired, I can make a tip through the mobile terminal (which I naturally do - I am not a monster). After that, she takes the portable part of the terminal and tells me to hold my phone next to it.



Apple Pay took 4 seconds to do everything.



Refusing to print a receipt (I recently developed a strange hostility to paper - I think the fact is that I want to work only with the “figure”), I headed for the exit. When I left the institution, I noticed how some people in the waiting area stared at me. These views were not dismissive. They were full of awe.



Just when I opened the door, I heard a woman watching me say, "God, how fast." I looked around and saw that all those present were staring at me with surprise, and at the cashier.



The city in which I live cannot be called small. Nor can you say that Apple Pay is a new or foreign product. It is available in much more places than people think (if they think at all). I just like to use it, and I believe that now the rest should be obvious, for which I love it.



The conclusion that people at the establishment did for themselves was that Apple Pay is a fast and easy payment method, or at least that it works out payment faster than chip cards. For myself, I realized that people still do not use mobile payments to the extent that they are available to them, and to a much lesser extent than, in my opinion, they should.



And I'm glad that I did not pay with the help of Apple Watch, because otherwise they would just have exploded their brains.

There are opinions of some experts that Apple Pay will be the next major breakthrough for the most expensive corporation, which allows not to slow down the growth rate, which is not surprising in principle given the general optimism regarding the development of FinTech. Ronnie Somerville, who is the founder of several e-commerce startups, has published an interesting column about this:

Will Apple Pay be the next Apple breakthrough?

Today, it is generally accepted that Apple needs a new great product (a la iPhone or iPad) in order to continue to grow. And iWatch is not suitable for this role.



The company is definitely doing some kind of work in the automotive industry , but experts believe that Apple’s entry into the payment industry promises it much more opportunities to make a breakthrough.



Music players and music subscription services existed before the appearance of Apple products. Nevertheless, Steve Jobs managed to rethink the design of the player, as a result of which the iPod was born, and the charm of the company's founder and his intransigence during negotiations with record labels led to the appearance of the iTunes format. Ultimately, the success of these products has revolutionized the music industry.



The situation was similar with the iPhone: phones with a touchscreen were invented much earlier, and developers could create products for mobile phone manufacturers and operators. However, the quality of these products was low, and the process of their development was expensive and spontaneous. Apple created a great premium product and offered a simple reward model that gave developers one-two thirds of the revenue from selling apps, and that now seems completely obvious.



The same simplicity and ease of use is typical for Apple Pay. However, despite the advantages of the new service, over the past three months, only 3% of the US adult population used it and made online purchases with it (according to Forrester Research ). At the same time, the other 10% preferred iTunes. However, even this figure does not go to any comparison with 57% attributable to credit cards, but at least ahead of StarbucksPay with its 5 percent.



Apple Pay downloads your credit card information to your phone, tokens it for security and allows you to pay for purchases from vendors who have installed NFC readers. Needing to distribute her services among entrepreneurs, she entered into a partnership agreement with Square , which made it possible to increase the number of outlets accepting NFC payments.



And here lies the key to understanding Apple’s mindset. If, prior to the intervention of the company “legal sale of music online” and “adding third-party applications to a mobile phone”, were areas where there was a mess, then the modern payment industry can be said to be one big source of inconvenience.



If a small entrepreneur wants to accept a credit card payment, he or she will have to enter the tangled world of commissions, the nature of which remains shrouded in mystery. And this is by no means an exaggeration: the European Union recently revealingly forced Visa and MasterCard to significantly reduce their commissions.



The mysterious world of commissions consists of merchants, their customers, customer banks, an electronic payment terminal provider used by the seller, a “payment gateway”, a seller's bank, a company that issues a seller’s credit card, and similar credit card issuers of customers. Each of these actors has a role in the overall process.



In simple terms, the larger the size of your company and the better you can negotiate, the less you will have to pay. Anyway, Square managed to build a whole business, charging “only” 2.75% of the transaction amount, and this is very significant. Taking into account the fact that a small business earns an average of 5 to 10%, we get a situation where from half to a quarter of the seller’s profit goes to pay for the transaction processing alone.



Apple is able to put everything in its place.



It could itself take the place of the client’s bank, the seller, the “payment gateway”, the seller’s bank and credit card issuers. Financial capabilities of the company allow it. Free cash reserves are almost enough to buy out Visa and MasterCard together. However, Apple is not going to do this, because if it decides to do what I am writing about below, then there will be no need for it, and these companies will cost much less as a result of it.



Let's break the whole circuit into separate components.



Speaking of technology on the side of the seller, it is necessary to understand that the number of businesses that use electronic terminals based on the iPad (including Square and Revel solutions) numbers several hundred thousand companies. Even more entrepreneurs use loyalty schemes, also based on the iPad (examples are Belly and Swipii). Many restaurants use iPad-based reservation systems (OpenTable and simpleERB). iPads are already bundled with NFC chips. Add an antenna and they can work with Apple Pay.



“Payment Gateways” are companies that provide an interface for credit card issuers. Apple will be easy to repeat this service. As for the seller’s bank, which, in essence, is a company providing acquiring services, creates an account and issues a credit card for it, all these actions become unnecessary in the new Apple model and stop playing at least some role in the process.



The customer’s credit card issuer provides the seller with a valuable service: he ensures that as long as the seller performs all the necessary procedures, the customer can afford to make a purchase. However, Apple has a base of iTunes, with 800 million accounts. Each of these accounts is associated with a credit card of its owner. Imagine that instead of credit cards, Apple will ask customers to “tie” their bank accounts to iTunes, as PayPal does with its accounts. In this case, the “card” in the Apple Pay application of your iPhone will no longer be a Visa or MasterCard card. This set of billing information will be owned by Apple. Similar to PayPal’s BillMeLater service, such a “card” could work as a debit or credit card.



As for the seller’s credit card issuer, Square built a small business lending business based on financial information that passes through an electronic payment terminal installed at the seller. If Apple receives similar data from merchants' iPads, it will be able to make informed decisions about whether to offer account opening or lending services in this particular case.



So, we have 800 million premium-level account holders who, as we know, spend more than users of other companies. We also have small entrepreneurs using NFC-enabled iPads. In addition to them, there are credit card issuers and banks, sitting somewhere in the middle between all the other participants and incorrigibly appropriating part of the money spent.



Understanding this, Apple can create an AppleBank — a premium bank designed specifically for its wealthy consumers, with exceptional benefits. Even despite Apple’s constant statements that it does not give out data to its users to anyone, it nevertheless receives considerable information about you based on your activity on the iPhone alone and can, if you wish, draw much more conclusions from them. And the company can solve the problem of “why do I need Apple Pay when I already use a credit card” using rewards in the iTunes store like a free track for every five use of Apple Pay, as well as direct rewards in the form of percentages of the purchase to the accounts of sellers who will be happy to save in this way.



Meanwhile, Apple is looking for opportunities to invest its worldwide cash reserves , which it does not want to return to the United States. What could be better than lending them to your own customers, consumers and sellers around the world? The annual rate of traditional lending unequivocally offers more attractive interest rates than government bonds.



Let's also not forget Apple's rich experience in the development of maps and local search. The company has invested a lot of money in these areas. Using these services, Apple will be able to direct users directly to the outlets where Apple Pay is already running.



In general, Visa and MasterCard is already time to start worrying. They were a little late in opening their systems to third-party developers, as Visa is doing now.



In essence, no one else has the advantages that Apple has in the local payment market. Apple calmly and slowly collects its Next Big Thing in pieces.



The article has been prepared for publication by PayOnline , an international system that allows you to receive electronic payments both on the site and in mobile applications. If you need to arrange online payment, feel free to contact us and subscribe to our corporate blog.