By Ray Birch
RANCHO CUCAMONGA, Calif.—Is there a big advantage in pulling out a phone to pay at the point of sale over pulling out plastic? Soon, there could be.
One person who has tested a new technology told CUToday.info it significantly reduces the “friction” at POS.
Analysts have stated that mobile payments adoption has been much slower than expected due to the fact consumers see no real advantage in pulling out their phone and tapping instead of inserting or swiping their plastic.
But a new solution from Apple may finally encourage more consumers to begin using their phones to pay at the point of sale rather than pull out a plastic card—a behavior change that will get an additional nudge as its merchant friendly.
With Apple's newly announced enhancements to its iPhone, any external device—such as a POS terminal—can now open an app automatically or trigger an Apple Pay payment by simply sending an NFC signal to a phone. The key here is the user doesn't have to manually open an app anymore to pay.
The move could also sway merchants that have wavered on employing tap-and-go at POS. Now, triggering an Apple Pay payment doesn't require an expensive POS terminal. Instead of using a POS terminal for in-store card-present NFC payments, an Internet of Things device would trigger a mobile card-not-present payment, just like when using Apple Pay online, Mobile Payments Today explained.
“This could be the proverbial shot in the arm that mobile payments needs,” said Nish Modi, vice president, digital and business intelligence, for CO-OP Financial Services. “Along with the push to tokenization and digital issuance by the issuers with the support of the card brands, this is going to drive adoption and use.”
Modi told CUToday.info that the Apple enhancement is going to open up endless opportunities for mobile payments beyond POS and into the Internet of Things.
“I envision further blurring of lines between online and in-person payments. It will also enable adoption of tokenized mobile payments internationally—where the adoption of Apple Pay or Google Pay has been minuscule,” Modi said.
One Person’s Test
Brian Scott, SVP of sales and solutions consulting at PSCU, said he has tried this new Apple functionality.
“I tested it with a different use case and the biggest thing is it greatly reduces the friction in the payments process. And, in my opinion, reducing friction is a big key to mobile adoption,” said Scott. “Making a mobile Apple Pay payment without this functionality isn’t that much easier that paying with a card. This functionality does make that mobile payment much easier. Authentication still requires the user to scan their face or a fingerprint, so it’s secure.”
Scott said that ubiquity and adoption are probably the biggest benefits.
“The more places that can accept these payments without upgrading equipment is likely the biggest positive impact to the mobile payment,” he said.
A ‘Few Seconds’ Faster
Bill Hardekopf, CEO of LowCards.com, sees the Apple solution moving more merchants to accept NFC.
“If retailers don't have to invest in an expensive new terminal, they may be more willing to encourage these payments,” Hardekopf said. “I do think this could accelerate the use of mobile wallets. Consumers don't find any real benefit to opening up an app to make a payment versus taking out a card and swiping or inserting it. Consumers may finally find it slightly more convenient to use their mobile device to make a payment. It may make the transaction faster by a few seconds.”
One Remaining Issue
One remaining issue will be consumer perception about the security of such a transaction, noted Hardekopf.
“There still seems to be a stigma about the security of a mobile wallet and making mobile payments. If consumers can be persuaded that it is a more secure transaction, then I believe it could become commonplace,” he said.
Lou Grilli, director of payments strategy at Trellance, addressed how the step could give Apple Pay a boost over Google Pay and Samsung Pay—and all the other “pays” that rely on an Android operating system.
“One of the advantages that iPhones have over Android is when you are at a POS terminal that is NFC enabled, the iPhone, even if locked, can launch the Apple Pay app,” explained Grilli. “In Android phones, that is not the case. The terminal is broadcasting an NFC tag to let devices know it is enabled, and the iPhone is always scanning for that particular EMV payment tag and automatically opens up the app upon detecting that tag. Apple’s recent announcement expands upon that. Apple gives other apps the ability to register for a particular tag, and when the phone scans and detects that particular tag, the NFC function in the phone will indicate to the registered app to wake up, to notify the user.”
Grilli said the Apple enhancement also allows a third-party app to scan for a particular NFC tag.
“For example, a store could put in a pillar that’s broadcasting a unique NFC tag at the entrance for loyal shoppers to pass by, which would alert an app on the iPhone. Then the user can use the app to scan items as they put things in their basket, and then just walk out, with payment happening in the app,” Grilli said. “The more people who use their phone for checkout-less shopping and other payment-related activity that doesn’t involve pulling out a card, the more uptake there will be overall of mobile payments.”