The Top Five Things You Should Know About Apple Pay

Apple has come a long way from its humble beginnings, first revolutionizing consumer computer sales, then mobile music devices, mobile phones, and finally online content sales and syndication. Apple, now the largest technology company on earth, is looking for new ways to use its huge sales network, adoring fans, and ubiquitous ecosystem to revolutionize new service areas. Its latest venture, Apple Pay, is the company’s first leap into the world of consumer finance, and there are five things you should know about it:

  1. It’s been done before. Apple Pay uses Near Field Communications (NFC) to send payment information to terminals. This technology is already in use on some credit cards, Android phones, and through a couple of different service providers. Terminals have also been advancing for some time to keep up with government regulations, credit card security, and the demand to process payments faster. Apple is simply building on an infrastructure that’s already in place, which will speed uptake.
  2. Apple has the perfect consumers. Apple has long impressed app manufactures by the trust, and money, that consumers place in Apple technology. Consumers spend more money through apps purchased on Apple devices than on any other platform, and all signs point to this phenomenon carrying over to the real world. Apple buyers are typically early adopters, high spenders, and they trust the security of their devices (as witnessed by the adoption of the fingerprint scanner, despite some initial teasing).
  3. The timing is right for Apple. Apple never jumps into a market unless it knows it can tie up the vast majority of consumers in that area. To do this, it works hard to achieve scale, and will do anything to ensure successful adoption of the technology. Jumping into payments means that Apple thinks it has both the money and the will to fix any security concerns that will arise in future versions of their devices. Some market factors, such as consumer’s confidence in the fraud protection on their credit cards and NFC improvements will help Apple become as ubiquitous in payments as it is in music.
  4. The technology is getting more usable. Apple’s rise can partially be explained by its ability to combine phones, cameras, and a number of other things into one device to reduce the number of things people carry. They plan on doing the same thing with payment, and hope that one day wallets will be obsolete. To speed this process along, all the wearable technology Apple offers will be equipped with the ability to make payments in the next few product generations.
  5. The banks have mixed feelings. Banks currently make a lot of money on the fees charged to retailers to deposit money into accounts from credit card transactions. While some of these fees will be reduced by the rise of Apple Pay, in the long run banks think they’ll come out ahead. Currently, a large number of merchants and consumers use cash or some other form of payment that banks can’t charge a fee on. As mobile devices become more prevalent and consumers start to rely on their phones for more of their transactions, banks are betting people will stop making cash payments and move to fee generating credit cards. Similarly, small merchants (such as those who operate in farmers markets) will eventually set up NFC receivers so their consumers can pay if they don’t have cash.

Apple won’t be entering the mobile pay market alone: huge wireless, retail, and payment companies are fighting to become the next standard. Consumers, for their part, may eventually lose interest and return to standard debit or cash transactions. Overall, despite the competition and the market, Apple Pay looks like a smart investment for a company made famous for its ability to defeat giants and dazzle consumers.