Looking ahead: Apple Pay overview

Brett Thornton
By Brett Thornton under Insights, News 05 June 2015


As expected Apple announced Apple Pay will be available to customers in the UK at their WWDC keynote. The service will be available starting in July to customers of HSBC, first direct, NatWest, Nationwide Building Society, Royal Bank of Scotland, Santander and Ulster Bank.

Bank of Scotland, Coutts, Halifax, Lloyds Bank, MBNA, M&S Bank and TSB Bank will follow later in the year, covering most of the biggest consumer banks with one notable exception, Barclays.

It will be available at 250,000 in store locations at launch, more than were available at launch in the US, in part owing to the UK’s head start in rolling-out contactless readers.

A host of high street retailers will offer the service (including Waitrose, Boots, BP, M&S, Pret) as well as Transport for London, who will let you use your iPhone or Apple Watch to pay for your daily commute. A range of apps are also simplifying their checkouts to take advantage of what Apple reported as a two time increase in checkout rates for their US app partners.

If you want to get ahead and talk to TAB about how Apple Pay can help your business, get in touch using the details below.


At TAB, we have been thinking a lot lately about mobile payments: we have been taking a detailed look at existing providers and systems, and drilling down into ways we are beginning to see mobile replace our wallets.

With this in mind, we share here a simple overview of Apple Pay, how it works and what it means for the future of mobile payments as whole. It’s a hot topic as we await the launch of Apple Pay in the UK: with Apple’s WWDC just around the corner, the bets are on as to whether June will be the month it finally arrives to our shores. Maybe it will, maybe it won’t - either way, we cover the essentials of what you need to know below.

What is Apple Pay?

Apple Pay is a service that offers users a simple, secure way of making a payment using a compatible device. Using Apple Pay, a customer can check out seamlessly while ‘in-app’; or make a faster, more friction-free payment when in a real-world store.

So is Apple Pay just another payments system?

It’s true - mobile payments aren’t new, and plenty of mobile payment systems already exist. What is also true, however, is that none have seen real mainstream adoption.

That’s because it’s hard to get us to change our habits, especially when the current solutions - like good old fashioned cash and cards - are working just fine.

To gain traction and be successful, any new payment method that is introduced has to be able to answer two fundamental questions from customers: is it more convenient than what I do now? Do I trust it?

So far, existing mobile payment systems have struggled to pass both of these two tests of convenience and trust.

Take a look at most in-app payment methods: they are often confusing, requiring customers to complete lengthy forms that derive from, and still ultimately reflect, a desktop experience. And the result? A staggering 86% of mobile baskets abandoned by shoppers.

In store, mobile payments haven’t reached critical mass because they frequently ask too much of the user. Think about the last time you found yourself in a busy high street store on a Saturday afternoon: do you want to stand at the checkout, finding the right app to allow you to make a payment, all the while hoping your internet connection loads the right QR code fast enough?

Or would you simply just pull your card out?

The Apple Pay difference

Unlike other mobile payment alternatives, the big difference (and hence the excitement) with Apple Pay is that it appears to have strong answers to the dual question of convenience and trust.

It’s hard to imagine any company other that Apple being able to create a service like this. Apple has the unique scale to do the right deals and to roll out the service quickly; it has end-to-end control of both the software and hardware; it has pedigree in payments (with over 800 million credit cards on file), and it has a highly engaged audience who routinely spend more via their devices than other mobile owners.


In store

Safe and sound

Unsurprisingly, security and privacy are high on Apple Pay’s priority list and a range of methods are used to ensure the service is secure.

Firstly, it uses your fingerprint to authenticate the payment, providing more security than the familiar PIN.

For most users, your card details are also already pre-loaded from the card you use in iTunes or the App Store. Otherwise, though, the process for adding a supported card is very straightforward: snap a picture of your card with your iPhone’s built-in camera, and Apple securely authenticates it with your bank.

An Apple Pay compatible device also ensures your card details are anonymous when shared with merchants. It does this using technology known as tokenisation, which replaces the card number, CSV, expiry date and personal data with a device-specific version of your card. This is stored on the secure element in your phone.

The device also generates a one-off and transaction-specific three-digit CSV code so that even if your card data was captured, it would be rendered useless. If you lose your phone, the card data cannot be used without your fingerprint and can be wiped remotely using Apple’s ‘Find my iPhone’ feature, without having to order a new physical card.

The impact of Apple Pay

We’re not predicting the end of the plastic - at least, not yet anyway. There is a long way to go before we can consistently rely on the technology we carry, or wear, to replace our cards.

Instead what Apple Pay, and the launch of similar services from competitors like Google, means is that users' expectations of payments will change. And we know that customers ultimately measure experiences against the best they have had - not just against your competitors.

We have seen in the U.S. that businesses offering customers the opportunity to pay with Apple Pay have had great success. In the 72 hours following Apple Pay’s launch, there were over one million card activations - and by January 2015, Apple Pay accounted for two thirds of contactless payments in the U.S.

It’s important to remember that success isn’t only evident in taking loads of payments, but also in improving the overall experience of parting with your money.

Seamless payments made in-app reduces abandoned baskets, and therefore drives up revenue. One-tap payment in store, meanwhile, speeds up queues and reduces the number of staff/hours at the till.

Both cases give people another reason to return - or a reason not to return, if your competitors are already making payment more seamless than you.

Beyond Apple Pay

But remember, Apple Pay is not the only answer. Google announced Android Pay last week at Google I/O, which adds the ability to automatically use loyalty and rewards cards when paying in store - a feature rumoured to be coming to Apple Pay soon.

Android Pay also opens up NFC payment to devices without fingerprint scanners, requiring customers to unlock their phone the usual way (pattern, pin or face unlock) before making a payment - arguably reducing the security of the system.

Additionally, because of the way Google generates the ‘tokens’ used to keep your card details safe in the Cloud, there are limitations to the number of payments you can make without an internet connection – a limitation that doesn’t apply to Apple Pay.

The atomisation of the wallet

In reality, though, Apple Pay is just one more step in a long transformation that we think of at The App Business as the atomisation of the wallet.

Every job done by something living in your wallet is jumping onto a mobile device. That doesn’t mean each of these things will become an app - many may live as part of an app, as a widget, or even just a notification.

One thing, however, is certain: the little piece of leather you carry around filled with pieces of plastic and paper is going the same way as the CD, the DVD and the point-and-shoot camera.

The place where this will be felt most keenly over the coming year is in payments. If your business relies on your customers carrying around small pieces of paper or plastic, it’s time to find the right way to deliver that value via mobile devices - fast.