What Every Retailer Needs to Know About Apple Pay


The world has been abuzz ever since Apple’s keynote event last week, when the tech giant unveiled the iPhone 6, the iPhone 6 Plus, and Watch, the company’s foray into the world of wearable tech.

But as our friends at Xero put it, for retailers, the most significant announcement that Apple made that day is the launch of Apple Pay. The company managed to round up a handful of major banks and retailers to participate in the initiative, and Apple promises that its solution will revolutionize mobile payments with “breakthrough contactless payment technology” that lets customers pay for purchases using their phones.

Plenty of analysts and experts have already weighed in on Apple Pay, and most are eager to see how it will affect retail and whether consumers will adopt the technology.

To help you understand the solution better, we’ve put together a quick guide on the topic. Below are some basic, need-to-know details about Apple Pay, along with insights on what you can do once it hits the US market in October:


How does Apple Pay work?

Apple Pay utilizes the iPhone 6’s Near Field Communication (NFC) antenna to enable contactless payments that don’t require physical cards, IDs, or apps. At checkout, users would simply need to hold their iPhone near the contactless reader and place their finger on their device’s Touch ID to complete the purchase.


Is it secure?

In theory, Apple Pay is very secure. Unlike with other mobile payment solutions, the credit and debit card numbers aren’t stored in the device nor in the cloud. Instead, Apple Pay creates a token that represents the credit and debit card number and stores that in the device’s Secure Element.

In other words, actual credit and debit card numbers are never used when the customer makes a payment. When a user adds their card onto their device, a unique Device Account Number is assigned, encrypted, and stored in a dedicated chip in the iPhone (and not on Apple servers).

At checkout, the unique Device Account Number, along with a dynamic transaction-specific code, is used to process the payment, which means the actual card numbers aren’t shared with merchants or with Apple.

Of course, it’s still too early to make any conclusions regarding Apple Pay’s security. The best way to evaluate the technology is to see it operate in the wild and determine if it is indeed as secure as Apple says it is.


Who’s on board?

In addition to working with the three major credit and debit card companies in the US (Visa, MasterCard, American Express), Apple has gotten the support of some impressive players in the banking and retail industries. Here’s a quick look at some of the companies and institutions promising to accept the technology:

Banks: American Express, Bank of America, Capital One, Chase, Citi, Wells Fargo

Stores: Bloomingdale’s, Macy’s, McDonald’s, Nike, Petco, Subway, Toys “R” Us, Walgreens, Whole Foods

Apps: Groupon, Panera Bread, Sephora, Starbucks, Target

(View the full list of participating banks, merchants, and apps here.)


Should you use it in your stores?

This is a valid question for merchants. On one hand, Apple Pay is very new and its success largely hinges on getting users and merchants to adopt NFC. This is no easy feat. Despite its longstanding presence in the mobile payments space, solution providers like Google Wallet and Softcard (formerly ISIS) have failed to get people to use NFC. (So much so that the acronym has been dubbed “Nobody F—ng Cares”).

Inc.com’s Maria Aspan makes a good point when she notes that “Apple Pay isn’t going to work at 97.6 percent of the places where you can shop in this country [US] – and retailers aren’t exactly rushing to embrace the newest technology.”

This doesn’t mean that the solution has no hope of gaining traction, of course. Apple has been known to drive widespread adoption. (Case in point: Touchscreen technology has been around for years, but it only gained ubiquity once the iPhone came out.)

If the company and its partners execute Apple Pay correctly, people (and in turn retailers) could start using it.

Plus, as mentioned earlier, Apple has managed to get key finance and retail players on board with the technology. Having major banks, stores, and loyal users backing Apple Pay gives it a huge advantage. As Sam Colt writes, “Retailers? Check. Card holders? Check. Banks? Check check check.”

For all these reasons, we recommend that you pay close attention to the technology, but hold off on implementing Apple Pay (or to put it more aptly, NFC) at your store.

NFC readers can cost between $250 and $300 per device, plus the cost of staff training and backend set up. That can be quite the investment for SMBs, and it may not be worth it if you don’t have a lot of customers using the solution.

And it’s worth considering the other players in the mobile payments space. In addition to NFC-enabled solutions such as Google Wallet and Softcard, there are alternative mobile payment apps, such as the ones offered by Dwolla and LevelUp.

PayPal also has a solution that lets retailers accept frictionless mobile payments through its integration with POS systems like Vend.

Then there’s  CurrentC, a software-based solution that works with most existing POS and payment terminals. Users will be able to pay using its official app or through the merchants’ mobile applications that utilize CurrentC functionality. An initiative by Merchant Customer Exchange (MCX), CurrentC is set to roll out in 2015.

Clearly, the mobile payments space is a bit too crowded at the moment, so the best thing SMBs can do is sit tight and gauge user adoption. Pay attention to the needs of your customers before considering a solution. How are they paying for products? Are they asking for alternative forms of payments?

It also wouldn’t hurt to study each solution’s user- and merchant-friendliness. Go out there and see how they work. If you’re evaluating Apple Pay, for instance, head to one of the participating locations so you can observe it in action. Doing so will enable you to you learn more about the technology and will help you make an informed decision if or when you decide to adopt mobile payments.


Your take

What do you think of Apple Pay? How does it stack up to other solutions in the mobile payments realm? Let us know your thoughts in the comments.




About Francesca Nicasio

Francesca Nicasio is Vend's Retail Expert and Content Strategist. She writes about trends, tips, and other cool things that enable retailers to increase sales, serve customers better, and be more awesome overall. She's also the author of Retail Survival of the Fittest, a free eBook to help retailers future-proof their stores. Connect with her on LinkedIn, Twitter, or Google+.

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