Apple Pay could shake up mobile payments sector

The iPhone is the perennially popular handset, in demand across the world. It is seen as the standard by which the luxury smartphone market is measured, but since the release of the iPhone 5 in 2012 the iPhone’s star has perhaps fallen slightly, with each new iteration being criticised for a lack of true innovation.

Apple can talk up the NFC capabilities of the iPhone 6, but the reality is that handsets by rival manufacturers have been integrating this technology for years.

That said, if any company can popularise a technology, it’s Apple – and the Apple Pay service accompanying the iPhone 6 could make waves in the mobile payments space. While it’s clear that Apple’s new device is not exactly targeted at emerging markets, there’s no denying that the device will be highly sought after in these regions, and many industry analysts are already discussing the impact that Apple Pay could have in areas where mobile payments are an entrenched part of everyday life.

We’ve gathered the opinions of some leading industry analysts on the impact that Apple Pay could have in emerging markets.

Upstream CEO Marco Veremis says: “Apple Pay has the potential to be a great accelerator for mobile payments, and while no one was expecting today’s announcement to speak about emerging markets, there is an opportunity to look one step further and see how Apple’s potentially revolutionary approach could work in key growth markets.”

“The potential for Apple Pay in the US and the West is huge and could prove promising for emerging markets as well”, he adds. “What consumers in emerging markets value most in a handset is functionality, ahead of brand image, a preference that home grown competitors like Xiaomi and Spice count one to build a brand following. But there are obvious limitations in some markets where credit card penetration is low.”

“We found that the preferred way to purchase content for nearly half of Nigerian consumers is through their mobile operator by pay as you go. In the same way Apple is looking to seismically shift mobile payments through its credit card database, they could make a similarly powerful change in emerging markets by teaming up with local operators instead of credit cards only”, concludes Veremis.

Enrique Velasco-Castillo of Analysys Mason agrees that the Silicon Valley firm has positioned itself well in the mobile payments space, saying: “Apple has an advantage in the race for mobile commerce and payments dominance thanks to a combination of security features in the iPhone 6, detailed customer data, key partnerships with card networks and merchants, and sheer good timing.”

He notes that security features on the iPhone - such as Touch ID, Secure Enclave, tokenisation and encryption between the handset and the payments terminal - mean convenience for users, and lower fraud rates for merchants.

Ovum Consumer Analyst Eden Zollner notes that while hype is nothing new in the m-payments space, Apple has the clout to have a real impact – but it will need the right partnerships to do so.

“NFC is the key enabling technology for mobile proximity payments but TouchID biometrics are also in the equation for authentication and Apple Pay looks set to be integrated with Passbook, which is a natural fit”, says Zollner. “It’s not all about proximity payments – Apple is also set to enable online checkouts without having to enter card details. This should get PayPal and other online payment providers a little worried, particularly as Apple already has 800 million iTunes accounts on file.”

Noting the importance of Apple’s influence on technology adoption, Zollner adds: “When Apple introduces cool features on the iPhone people tend to use them, which is critical for the future of NFC as an enabling technology. If consumers start using NFC for proximity payments then merchants will be more prepared to invest in it, a key factor that has held NFC back.”

Apple has a proven track record of popularising technologies, and many in the industry are of the opinion that NFC payments could be the next Apple success story – although this could be limited to developed markets, where mobile payments are not so ingrained. Apple products are in high demand in emerging markets, but to have a real impact in these regions the firm will have to address the issue of low credit card penetration.

This issue could be addressed by partnering with a mobile wallet provider. Mobile wallets, the technology that allows customers without bank accounts to use banking services provided by their mobile operator, are widely used and trusted in emerging markets, and Apple has many potential partners to choose from if it wishes to push mobile payments in the high end sector of many emerging markets.

It remains to be seen whether Apple wishes to push Apple Pay in emerging markets, but the brand’s inimitable allure will no doubt see NFC payments gaining traction in developed markets. Increased awareness of mobile financial services will likely lead to greater acceptance and a more secure infrastructure, which will benefit consumers everywhere.



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