With every year, it seems that ‘smartphone’ or ‘mobile phone’ is an increasingly inadequate term to describe these devices that we carry everywhere we go. Although the latest Apple chip powering the latest iPhone devices is rapidly encroaching on desktop CPU performance, to talk about mobile devices only in terms of computing power would miss the point.
The breakthrough applications for smartphones have not necessarily been enabled by raw power alone. Rather, it is the smartphone’s combination of portability, ubiquity and always-on connectivity that inspires and generates new and exciting applications.
Apple continues to push the envelope with its recent hardware and software developments. The incorporation of NFC (Near Field Communication) into the iPhone 6, the release of the Apple Watch and regular iOS releases underpinning all Apple’s devices have made it possible for mobile devices to integrate themselves even more deeply into our lives.
I’m sure I’m not the only one eager to take advantage of an exciting new application enabled by these new technologies: Apple Pay. At the risk of stating the obvious, this is a way to pay for goods and services with your Apple phone or watch. Since it was announced I’ve been wondering, when will it be available here in Australia? Or, rather, why isn’t it here already?
What is Apple Pay?
In Apple’s characteristic style, Apple Pay is a user-friendly wrapper around a collection of technologies, not all developed in-house. Essentially Apple Pay is a digital wallet – a way of storing payment information within your phone. Unlike some other systems described as ‘digital wallets’, which are more like smart cards in that they actually store value, Apple Pay really is a digital wallet in that it ‘contains’ an existing credit card card. Not a copy of your actual card, or even your card number, but the necessary information to pay with that card. While the latest Apple devices incorporate a ‘Secure Element’ for storage, using Apple Pay does not mean your card numbers are stored in the device, but rather card information is represented by a special token.
Tokenisation enables a purchase to be transacted without sharing the card number with the merchant. This tokenisation process is handled by the card schemes (Visa, MasterCard) and they deserve some credit for enabling a more secure way of handling card purchases.
Of course, storing payment information isn’t much use unless you can use that information to buy things, and that’s where Apple comes back into the picture. Both in-app (for physical goods and services) and Point of Sale (POS) purchases are enabled by Apple Pay, in the latter case by using the NFC chip in the iPhone (from iPhone 6, onwards) to communicate with NFC-enabled POS terminals, such as those currently used to accept MasterCard’s PayPass and Visa’s PayWave.
Apple Pay might just be a killer feature for the recently released Apple Watch. With its built-in NFC chip and link to the Trusted Store held within the phone, the watch will make payments possible without even taking your phone out of your pocket, let alone your purse or wallet.
Australia is ready for Apple Pay
Australia looks to be a ripe market for Apple Pay. A relatively affluent market with strong iPhone sales and high usage rates means that there is considerable latent demand. And there has been ample precedent set for Australia being among the early recipients of new Apple technology and releases if you look at device releases and the local availability of Apple Music relatively soon after the US and before other likely markets, for example. With a healthy Apple market share and the ability as a country to spend up on this niche, Australia is a likely spot for Apple Pay success.
The point of sale technology required is already in place and in use by merchants and consumers. Compared to the US, where signing is still the norm, Australians are very familiar with contactless payments thanks to the introduction and swift, world-leading adoption of options like PayWave and PayPass, and we’re preparing to phase out signatures for card transactions altogether.
When it comes to low-value purchases, in just 12 – 18 months we have gone from zero use of contactless payment to the expectation at the checkout that you will be using Paywave or Paypass. In fact, attempts to complete card payments the (suddenly) old fashioned way of swipe + PIN are often met with surprised looks or brief blank stares from retail staff. (I’m all for contactless payment but not all my cards are enabled just yet. Maybe you’ve seen that look yourself.) The ease of adoption has been quite obvious.
A possible downside to widespread adoption of Apple Pay is the further weakening of the domestic EFTPOS system in favour of the overseas-controlled card schemes like Visa, MasterCard and American Express. It could be argued, though, that the failure of EFTPOS Payments Australia Limited (EPAL) to introduce a contactless debit solution in a timely manner has left it ripe for such disruption.
Once the card networks are enabled for tokenisation in Australia – and work is certainly underway – the opportunity will be there for Australian merchants and vendors to incorporate Apple Pay into their applications and POS terminals. (Having said that, Mastercard doesn’t seem too keen on it.)
What is the hold-up and what can you do?
The hold up is between Australian banks and the card schemes themselves ie. Visa, Mastercard, American Express etc. They need to make and finalise agreements to allow for the tokenisation. In this scenario (ie. contactless payments), the customers of the credit card schemes are the banks. It is in the banks’ interests to have their products enabled for Apple Pay as they will get a small percentage of each transaction, just like any other transaction for a card they’ve issued. Apple Pay should drive more transactions to their cards, even though no physical piece of plastic is involved in each transaction. So it’s of no use for consumers to try and pressure the Visas and MasterCards of the world. If you do want to try and push things along and have your say, you could contact your bank and ask them why this isn’t available yet.
Of course there are many factors at play. The latest news is that fee sharing is apparently a sticking point as both Apple and the banks try to wrangle the best deal for their own coffers.
If you simply must try to have an impact yourself, consumer pressure on Australian banks to work harder to finalise agreements with card schemes could be one way to get Apple Pay here sooner than later.