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Our smartphones are already our de facto
camera, music player, navigational device and personal assistant. Now Silicon
Valley wants to make them our wallet, too.
Apple's service, dubbed Apple Pay, will allow customers to buy goods
in physical stores with a simple tap of their iPhone 6, iPhone 6 Plus or Apple
Watch smartwatch, when that device hits shelves in early 2015. Apple Pay users will
load their credit card information onto the phone and then press their device’s
Touch ID fingerprint scanner in the checkout line to authenticate the purchase.
The process will be faster and more secure than using a debit card. Apple will
generate a unique ID number for each transaction, meaning users' credit card
data numbers will not be shared with merchants.
Apple Pay is launching just as the smartphone
is becoming a central point of commerce for the average shopper. Consumers
spent $110 billion via their mobile devices last year, according to research
firm Euromonitor, and they used their phones to research products before buying
them in stores.
But consumers are still reluctant to give up
their credit cards. Mobile payments generated $4.9 billion in sales in 2014, a
paltry figure compared to the year's $4.8 trillion in card transactions,
according to Euromonitor.
The transition to mobile payments is
challenging because it requires buy-in from so many different players.
Consumers have to be convinced it’s worth their time to learn a new buying
behavior. Retailers have to pay for new equipment so their point-of-sale
systems can accept payment from phones and smartwatches. Banks and credit card
issuers also have to buy in.
Apple has a few key advantages over its
competitors. The company has a knack for convincing people to change their
digital lifestyles, whether by downloading MP3s, surfing the web on a phone or
using a large tablet to watch videos. And thanks to the iTunes Store, Apple has
more than 500 million credit cards already on file. Those customers will be
able to start using the same accounts they use to buy apps and music to buy
goods in the real world when they first boot up Apple Pay.
However, analysts say convincing shoppers to
give up credit cards, which are already fairly painless to use, will take more
than just offering convenience. The most successful mobile payments platform to
date is the Starbucks app, which rewards customers who pay via their phones
with free drinks and other perks. Today, Starbucks processes about 15% of all
its transactions on the app, or about 6 million per week.
“The customers really feel It’s not just about
payments,” says Ben Straley, Starbucks’ vice president for digital products.
“It’s also about being rewarded for their loyalty.”.
With many competitors offering mobile payment
options, analysts expect the segment will finally take off soon. Euromonitor
projects in-store purchases via phone will rise to $74 billion by 2019 — though
that's still a far cry from the trillions in card purchases we see today.
Mobile devices are already becoming a common tool for buying things in the
virtual world. It could very well happen in the real world, too. “It’s just
shopping, whether you’re buying it in a store or buying it online,” says
PayPal’s Nayar. “The lines between what that looks like have started to
disappear.”
edited from Times
