Apple Pay expands into UK

  • Mobile Banking
  • 09.06.2015 01:00 am

Apple Pay will come to the UK in July, Apple confirmed at its Worldwide Developers Conference in San Francisco on Monday. It will be available at more than 250,000 locations - more than the number of merchants it had in the US for last year’s launch. Participating retailers include Marks & Spencer, Costa and Waitrose – as well as Transport for London, meaning that Tube and bus travel can be paid for with Apple’s contactless payment system.

Apple Pay will be supported by more than 70% of the credit and debit cards in the UK, said Apple executive Jennifer Bailey at WWDC.The mobile payment system launched in America in 2014, alongside the iPhone 6, but has been slow to expand to other territories.

Britain is the first country outside the US to have access to use Apple Pay, which lets users pay for things, both on- and offline, using just their phone or watch. When used as an offline payment system, Apple Pay works in conjunction with an NFC (near-field communications) chip found in the two newest iPhones and the Apple Watch to let users pay for goods by tapping their phones on contactless card readers in stores.

In the US, the system took a marathon of deals to put together, with Apple negotiating with banks, retailers and credit card companies individually to build enough support. Elsewhere, however, the launch is expected to be much simpler because Apple Pay uses the same technology as that found in conventional contactless card readers, already common across much of Europe and Asia.

But unlike contactless cards, Apple Pay includes an extra security measure – tokenisation – which ensures that the card details stored on a phone are never passed to the retailer. Instead, the payee receives a one-use “token”, which allows them to debit the payment but cannot be reused in future.

Online, Apple Pay uses the same tokenisation system to speed up and secure e-commerce, letting iPhone owners pay for goods on supported websites with just a tap of their finger on the phone’s fingerprint reader.

In the US, uptake of Apple Pay was strong, with more than 40% of iPhone 6 owners having used it at least once, according to Auriemma Consulting.

But the service was hampered by a need to bring partners in one by one, leading to some major hold-outs: most notably Walmart, which is already waging a war against credit card firms over merchant fees and reportedly views Apple Pay as merely perpetuating an expensive system.

Spiros Theodossiou, VP of Product Strategy, Skrill commented:

“The payments industry has a lot to thank Apple for – not the least for making a lot of people familiar and comfortable with online payments and digital wallets.

“While Apple Pay has seen slower than anticipated adoption in the US, much of this is due to the far smaller base of places where Apple Pay can be used (contactless terminals) there. The good news for Apple is that the UK has embraced contactless payment methods with 58m contactless cards issued and a 330.8% rise in contactless payments in 2014, according to the UK Cards Association.

“As consumers do more on their mobile phones, they demand more connected and immediate experiences. This is what is driving the likes of Apple, Google and Samsung to tackle the payments space.

“Such brands help build credibility among those consumers previously cautious of adopting mobile payments. This is good news for the digital payments industry as a whole and will only accelerate the migration away from cash to more convenient payment methods such as digital wallets from providers like Skrill.

“This is just one of multiple disrupting technologies that will impact banking and payments. Whether its mobile devices allowing instant access, or NFC being integrated into phones and wearables, or Facebook offering payments through messenger, payments is set-up for a revolution in the coming years. There is no doubt the relationship consumer have with banks, card schemes, phone manufacturers and technology companies will continue to change.”

Lu Zurawski, Solutions Practice Lead Consumer Payments EMEA, ACI Worldwide comments on Apple Pay announcement at WWDC 15:

“The launch of Apple Pay UK is potentially the most significant event in consumer payments for over 50 years, since the advent of cards and ATMs. As consumers become familiar with using phone devices to make purchases, we will probably see a plateau in the issuance of plastic cards in the next few years, followed by a long but inevitable decline of cards into obscurity.

“ApplePay has every chance of being a big hit in the UK, in particular in those parts of the country where contactless payments have already proven to be popular with consumers, such as within the M25 where consumers are benefiting from the ‘Oyster card training effect.’ UK card issuers are already scrambling to be part of the launch party in the hope their cards become ‘front of wallet’ – not just for physical purchases, but for online transactions too.’ 

“UK banks that move quickly to adopt ApplePay will need to carefully consider the economics of this new scheme and how to accommodate other alternatives too e.g. Samsung Pay, Android Pay or the Zapp scheme. Behind the scenes, bankers are trying to work out how to stitch together all these new payments operations, whilst offering their consumers an overall, easy to use service.

“Bank strategists need to get prepared for big, changes in the way consumers interact with their banks.  Banks must not only become experts in payments technology but also in ‘behavioural economics” in order to fully grasp the payment behaviour and preferences of today’s consumer.’


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