|What people are saying about Apple Pay
Last minute hiccups
Water-tight NDA preventing industry revelations
Comment from Temenos, Arxan, Advanced Payment Solutions, MasterCard, Barclays, Elavon, Sopra Steria, Adyen, Delphix After a terrific build up to the launch of Apple Pay in the UK, the actual event came and went with little fanfare, despite the eagerness for virtually every payments firm to put forward an executive to comment.
The launch was not without hiccups. At the last minute HSBC admitted that its customers would not in fact be able to pay with their iPhones until the end of July due to technical difficulties. This means that customers of First Direct, an HSBC subsidiary, will also have to wait. Customers of five other banks, Bank of Scotland, Halifax, Lloyds, TSB and Marks and Spencer - will launch in the autumn.
Those that are supporting the system which runs on the same rails as contactless debit, can use their iPhone 6, iPhone 6 plus and Apple jwatches to pay for goods and services up to a limit of £20 (£30 from September). Their identity is verified through their fingerprint. Some retailers will be offering a higher spend limit, and this will require a second verification by the customer.
Visa, MasterCard and American Express have all registered to accept Apple Pay transactions.
The banks offering Apple Pay are NatWest, Nationwide, Royal Bank of Scotland, Ulster Bank and Santander.
Retailers and restaurants offering the service in the UK include Waitrose, M&S, Boots, McDonalds, while Transport for London is also allowing people to pay for trips in London using the service.
Apple is the first big non bank player to make a move in mobile payments but there are others to follow, including Android Pay from Samsung phone owners, which is due to launch in the Autumn.
What was intriguing the card industry was how much the banks have agreed to pay Apple for the privilege of being part of the first wave of plausible mobile payments initiatives. In the US, Apple managed to secure a deal for 15 basis points to be paid for each transaction, which equates to 15 cents for every dollar spent. Interchange is considerably lower in Europe, and it is unlikely the banks have agreed a similar deal.
Rich Wagner, CEO and founder of Advanced Payment Solutions says that Apple made the banks sign an incredibly robust NDA which forbids them to divulge any details of the contract, but it is difficult to see how they can pay 15 basis points when they are only making between 1.5 and 2% on each transaction in the first place.
Other questions still to be answered are how is going to own the customer data in an Apple Pay transaction? It is reasonable to believe that it is the data that is more valuable to Apple than the transaction, but this disintermediation of the customer is something that banks have been fighting to avoid for years. Said Wagner: "There will be disruption, but this battle is not over yet. It will be five to seven years before we can deduce whether or not it has been a game changer. The one differentiater is customer experience. Apple is good at this, and banks are not."
Another big positive is security.
Apple Pay stores cardholder information in a Secure Element on the Apple device but credit or debit card details are not. Instead, a unique Device Account Number is assigned, encrypted and securely stored in the Secure Element Each transaction is authorised with a one-time unique dynamic security code.
There were plenty of others keen to comment.
Barclays: "We are really excited about the launch of Apple Pay and can confirm that we will bring Barclays debit cards and Barclaycard credit cards to Apple Pay in the future," tweeted a Barclays spokesperson. Barclays last week agreed to support the Vocalink owned bank to bank mobile based transfer system called Zapp which is due to launch in October, but its decision to offer Apple Pay too came as something of a surprise, as it also has Barclays Pingit.
Andrew Key, President of Europe for Elavon said: “Our business customers will love bringing the convenience and security of Apple Pay to their customers. We're thrilled to enable our infrastructure to support Apple Pay, along with the issuing banks and retailers to bring consumers an easy, safe and secure way to pay.”
Elavon has been supporting its UK customer base to ensure that it was ready to offer Apple Pay as soon as it launched. James Williams, Head of Finance for the Tortilla restaurant group said: “We’re so excited that Apple Pay is coming to the UK, and our partnership with Elavon means that we can offer this innovative digital payment opportunity to our customers right from day one. Tortilla customers are always looking for exceptional service and we believe that accepting Apple Pay will be a great addition to the experience we provide”
“It’s fairly safe to say that the Apple Pay Secure Element is as secure as the chip in the chip and PIN cards in your pocket, purse or wallet. Consider that the underlying architecture and standards which define what a Secure Element is, what it does and how it protects sensitive data, also cover the security hardware which we see every day in our chip and PIN cards. In fact, in many cases, exactly the same hardware as is used in our EMV-compliant chip and PIN cards will be integrated into handsets like the iPhone 6 as the Secure Element. Not only is the hardware basically the same, the microcontroller which is at the heart of chip and PIN cards and Secure Elements will have been subject to rigorous security testing to ensure that it is fit for purpose and is able to withstand external attacks and to employ tamper-resistant techniques to ensure that information is wiped should a hardware attack be detected.” Liam Lannon, Payments Transformation Consultant, Sopra Steria
Adyen, the payments technology company, is enabling businesses including River Island, JD Sports, JUST EAT, Pologram, Takeaway.com, TravelBird and Vueling to support Apple Pay in the UK. Myles Dawson, UK Country Manager at Adyen said: “The launch of Apple Pay has caused a real shift in the payments landscape - its UK debut will be exciting news for consumers, offering access to a slick and quick payment option with a brand they love, and carry around with them 24/7. What these consumers won’t see, however, is the significant rearrangement behind the scenes as card schemes and issuing banks grapple to establish new relationships, security approaches and commercial models.
"The launch will cause further momentum in an already extensive contactless NFC terminal infrastructure in the UK – a further endorsement of the established payment rails and EMV infrastructure. This will likely lead to an uptick in adoption of mobile payment technology, and consequently, Apple will find itself in a constant battle to balance user convenience with ensuring security is factored in from the start. This simply has to be a number one priority if consumers are going to put their trust in mobile payments. With that in mind, it is encouraging to see tokenisation at the heart of the security agenda, which will help issuers with payment channel separation and also protect the merchant in the event of a data breach.”
With pervasive technology, a huge install base and deep pockets, Apple Pay is all set to become a vehicle for slick payment services as it further entrenches itself into our day-to-day lives. It begs the question, what next? Apple bank? Google Loans? Amazon Insurance?
In contrast, big banks risk finishing last in the race for the mobile wallet as they battle complex legacy systems, inadequate development environments, old methodologies and poor non-production data. For banks to retain a share of the digital banking future, they need to take the leap and concentrate on modernising their infastructures, embrace DevOps and Continuous Delivery models and make quality data available on demand. Only then will they be on a level playing field with the more agile high-tech companies." Jes Breslaw, Director of Strategy, Delphix
“The launch of Apple Pay in the UK is another node in the already expanding world of mobile payments. However, this launch does trigger a debate over ‘software vs hardware-based security.’ A hardware-based approach, as found with Apple Pay, although it is seen as restrictive and could offer little incentive to merchants due to the proprietary nature of Apple, it has for a long time been viewed as stronger in terms of security. However, the software-based, Host Card Emulation (HCE) approach found in Android Pay is close on its heels. We have seen advancements with the HCE approach come a long way in recent times, as it achieves a similar level of security protection as hardware-based, and offers additional advantages of speed and agility." Winston Bond, Technical Director at Arxan Technologies
“Innovation in UK payments means it’s fast becoming the most advanced market in the world and the arrival of Apple Pay heralds this new era. We will see more change in the next five years than we’ve seen in the last 50, bringing even more convenience and security for consumers,” said Mark Barnett, President of MasterCard UK & Ireland.
“In no time Apple Pay has exceeded two decades of bank efforts to enrich the way in which credit card payments work. We are already seeing evidence that this is the first payment mechanism where consumers are prepared to change merchant if Apple Pay is not offered as a way to make the transaction. Its brand is that strong. Nevertheless, banks retain many inherent strengths, and the savviest should emerge as even stronger brands from the payments shake-up. They have the deepest networks, the ability to offer integrated products and services and – for now – they hold their customers’ precious spending and savings data. Their customers could be given more options for products and services when it is most convenient to them; the merchant benefits, too, from improved customer satisfaction translating into sales.” John Schlesinger, Chief Enterprise Architect, Temenos