Introduction and the cashless economy
Cash is dead. Electronic payments are hardly new, but the arrival of Apple Pay in the UK is sure to bring contactless and mobile payments to the fore. It could mean a spike in sales of iPhones and the Apple Watch, though with a significant number of people with the tech already in their pockets, millions are about to give Apple Pay a try.
"Accepting contactless payment, and specifically Apple Pay, is a great opportunity for a business to present themselves as tech-savvy, modern and forward looking," says Phil Woods from Apple Specialists KRCS Group Ltd. "Many people will be looking to take advantage of the features of their new Apple Watch or iPhone 6, and may seek out retailers who can support Apple Pay, so businesses should get decals for their terminals and shop windows advertising that they support Apple Pay."
The view from Denmark
Some countries are far more advanced than the UK and US when it comes to contactless and mobile payments. "Anyone wanting a glimpse of the future of cashless payments need only look overseas to Denmark, which has the lowest cash payment level in Europe and is currently considering removing obligation for some retailers to accept cash at all," says Dan Wagner, CEO and Founder of Powa Technologies, which is working with Denmark's Danske Bank to help it usher in a new level of payments freedom in the country.
Although it will take time for the UK to catch up with Denmark, businesses need to be ready for the new era. "Rather than seeing it as a challenge, they should take it as an opportunity to rethink their strategy," says Wagner. "Taking physical cash out of the equation creates a huge amount of freedom, enabling them to completely restructure the retail experience and do away with cumbersome tills and queues entirely."
Playing catch up
Others think that the UK will catch up quickly. "The predicted 30% decline of cash payments by 2025 is a massive underestimation," thinks Marty Carroll, head of client services at Head London. "With the launch of Apple Pay, we are going to see marked growth in contactless payment happening much faster than predicted – particularly in the UK where the infrastructure already exists wherever contactless payment is offered." Given that 4,000-plus retailers already have contactless terminals, Carroll thinks that they need do no more than contact their payment provider and state that they want to accept Apple Pay.
The cashless economy
Cold hard cash is on its way out, with digital payments now dominant and new tech like Apple Pay and contactless debit cards destined to reinforce that trend. But can companies support it? "This increasing dependence on digital payments should be encouraging merchants and financial organisations to take a hard look at their ability to support electronic payments across their digital supply chain," says Paul Heywood, Managing Director and VP of EMEA, Dyn.
The ever-faster move to digital payments is just the latest salvo; companies are already relying more and more on websites, mobile apps and connected devices. Monitoring, controlling and optimising online infrastructure is now key.
Internet performance
People expect to be able to make cashless payments efficiently and quickly, and if that doesn't happen, they may go elsewhere. "Businesses must be able to offer customers a seamless, consistent digital experience, from browsing all the way through to final payment," says Heywood, who stresses the importance of internet performance. "With insight into internet performance, businesses can make informed decisions, which ultimately serve to meet exacting customer expectations by delivering fast and reliable assets via the web," he notes. With a boom in cashless payments and an increase in global competition, offering a fast, consistent and carefully controlled service could be key.
Staff training and security risks
The legal limit
The built-in restrictions of the NFC-powered Apple Pay mean that the service isn't for everyone. "Many businesses, particularly those whose transactions are above £20, may have seen very little usage of contactless to this point, and may not even have point-of-sale terminals capable of accepting NFC transactions," says Woods.
That said, Apple Pay's £20 transaction limit will rise to £30 in September. "It's a classic case of regulation not keeping pace with innovation," says Carroll. "The immediate draw of Apple Pay, then, is for lower transactions outlets like Starbucks. Looking forwards, the fact that London Underground signed up from the get-go is important."
Staff training
Also key to the success of Apple Pay will be staff training. "Staff need to be familiar with the procedure, which means businesses will need to show live transactions on Apple Watch or iPhone to their staff, a challenge considering the hardware that will be required to do that," says Woods. "Common procedures such as issuing refunds require some very specific actions on the part of the retailer and the customer, including access to the device that made the payment." Will customers automatically understand the £20 limit? Probably not – and declining a payment for £21 will have to be done tactfully.
Apple Pay or Android?
Newer Android phones have proprietary payment tech that works with existing terminals, and not just contactless ones, as with Apple Pay. "While the sheer number of Apple devotees will drive initial contactless use, it will soon become part and parcel of everyone's payments," says Carroll.
Winston Bond, Technical Director at Arxan Technologies thinks that Apple Pay triggers a debate about software versus hardware-based security. Relying solely on an iPhone or Apple Watch, Apple Pay, by definition, is the latter. "Although it is seen as restrictive and could offer little incentive to merchants due to the proprietary nature of Apple, it has for a long time been viewed as stronger in terms of security," says Bond. "However, the software-based, Host Card Emulation (HCE) approach found in Android Pay is close on its heels … and it achieves a similar level of security protection as hardware-based, and offers additional advantages of speed and agility."
With Android platform adoption at least four times greater than iOS globally, the ultimate winner will be software – and that means Android. Bond stressed that to triumph, HCE tech will have to embrace tamper-proofing software and white-box cryptography.
Is there a risk of fraud?
Built into Apple Pay is tokenisation, where card details are not shared, which theoretically makes it safe. "Contactless is faster, easier and far more secure than using a credit card," says Carroll. "Every time a consumer hands their card number to a retailer is a potential opportunity for fraud, but contactless payment, by contrast, uses tokenisation, while Touch ID using fingerprints is infinitely more secure than PIN numbers.
Others think that Apple Pay is risky. "With a £20 limit to payments, the message is simply that this is not yet safe to use – there are many banks that have had successful mobile wallet launches with much higher limits," says Mary Ann Miller, Senior Director, Fraud Executive Advisor & Industry Relations, NICE Actimize, which has experience of Apple Pay's launch in the US.
Since tokenisation has been baked into the payments process, Apple Pay is supposed to be safe, but there has already been significant fraud around card provisioning. "Apple Pay has been made so easy to use that now potentially any fraudster can set up new iPhones with stolen personal info and then call the banks to provision the victim's card to the phone," says Miller. "This has already caused huge losses in the US, where many banks were not fully prepared."
Either way, as contactless payment reaches critical mass, cash and card-stuffed wallets will soon be a thing of the past – and businesses need to be ready.
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