There is nothing new about contactless payment, but what will the launch of Apple Pay in the UK mean for British retailers?
If you look past all the marketing hype around the launch of Apple Pay in the UK, there is nothing new about contactless payment.
Indeed, many UK retailers already offer it as an option on purchases under £20.
As long as their payment system is flexible and can be enabled to process Apple Pay transactions, the arrival of Apple Pay will not cause much additional work for retailers from a technical point of view.
Aside from the fact that consumers will be using their smartphones to swipe the contact point, rather than a debit or credit card, the process is roughly the same, and the technology behind it fairly straightforward.
From a consumer point of view, for those with the right device, Apple Pay will be a welcome addition to the high street as it offers yet another option when it comes to the checkout.
For retailers too, while contactless is not new, it will deliver significant benefits from a customer journey and reputation perspective, as they are seen to be offering the latest in contactless payment with as little friction as possible during the payment stage.
But are there hidden considerations that retailers mustn’t ignore before this all takes place?
First of all, your payment provider will need integration to Apple Pay. Several have this already, but not all providers.
It will also be interesting to see how the Android community follows this with their competing products.
What implication will this have on contactless apps? Will they be as easy to transition as Apple Pay or will they involve further investment by retailers?
There are no technical barriers with Apple Pay, so perhaps the most interesting consideration is a commercial one.
Retailers already pay handling fees to credit-card companies whenever consumers use their payment cards to pay for a purchase. These charges range from 1% to 3% of purchase amounts, for regular card transactions depending on the retailer.
“This might leave the retailer feeling a need to meet customer demand, but then having to pay higher fees for the provision of it”
Martyn Osborne, PCMS Group
Other forms of popular wallet payments then add an additional fee for the convenience of brokering the transaction.
Although Apple Pay does not charge an additional fee they could introduce one in the future.
The financial implications on retailers could be significant, particularly as more and more people acquire compatible phones.
This might leave the retailer between a rock and hard place, feeling a need to meet customer demand, but then having to pay higher fees for the provision of it.
Online competition has put massive pressure on margins for retailers with stores, so it remains to be seen if retailers can stomach other forms of payment that take more margin away from the bottom line.
As with everything that Apple does, Apple Pay will be straightforward, consumer-friendly and will have a positive impact on the customer journey.
Long-term success, however, will rely on penetration of compatible phones in the market and acceptable commercial terms for retailers.
- Martyn Osborne is chief product officer of global solutions, at PCMS Group