WASHINGTON – Calling Apple Pay the “Trojan Horse” of the payments industry, the Washington Post recently suggested that Apple’s payment platform will “eat” the banks and credit cards. According to the news source, here are several reasons why:
“Once Apple has established its platform, it won’t need the banks and credit cards any more. It will be able to take advantage of another new technology, the blockchain, to offer an alternative payment option. Blockchain is the core technology behind Bitcoin, and functions as a transparent ledger of transactions, concurrently hosted on numerous computers around the world—allowing the creation of digital currencies and virtual banks,” writes the news source.
The Post continues that American Express, MasterCard and Visa charge merchants roughly 2% of every transaction in swipe fees, whereas another payment option—“let’s call it AppleCoin”—with an easier and more secure payment option would diminish loyalty to the credit card industry. The news source notes that the credit card industry “extracts more than $100 billion in fees—a tax that we [consumers] end up paying for—and gouges us the moment we miss a payment. Apple would dominate this industry.”
However, Apple still has quite a ways to go before its Apple Pay platform becomes a household name. The Post writes that, according to Pymnts.com data, as of October 2015, 15% of all iPhone 6/6s users had tried Apple Pay. “That is an increase from 9% in November 2014, but is hardly enough to set the world on fire.” Furthermore, roughly 5% of all Apple Pay eligible transactions take place through the service.
The Post suggests that another advantage to team Apple over team credit card is the Apple Pay experience at checkout: “Being lightning fast, it may slice 30 seconds off a chip-and-pin credit card transaction,” a reference to EMV transactions taking longer at checkout to process. In terms of security, the news source gives the edge again to Apple Pay, noting that the biometrics used for authentication (the user’s fingerprint) is more secure than a four-digit PIN, and Apple does not store a user’s entire credit card number on the iPhone. “[S]o if the phone is stolen, that information is not taken with it.”
Apple may also have a market advantage in its “massive treasure trove of user data. So yes, Apple is going to continue to improve on Apple Pay for quite a while,” writes the Post.
Read more about Apple Pay in the January 2015 NACS Magazine.