Opinion

Why a rush to support Apple Pay could be wrong for independent retailers

5 min read

19 August 2015

Little, if anything, was said about how Apple Pay would impact smaller independent retailers upon its UK arrival – nor how firms might use the technology to drive growth. While there is an opportunity to scale and capture the increase in mobile shopping, it doesn’t lie completely in the Apple basket.

Firstly, let’s look at US consumer adoption of Apple Pay ten months in. Gallop research found only 21 per cent of iPhone 6 owners used their device to process their Apple Pay transactions – and according to Pymts.com, 60 per cent forgot about the service after using it for the first time.

Here in the UK, Apple Pay is expected to enjoy a more rapid adoption because we’re much further along in the use of near field communication (NFC) and contactless payment. But you can’t assume every retailer is using the right hardware – known within the industry as a standard payment encryption device – to support NFC. If not, an upgrade will be needed.

There’s also a disparity between Apple Pay in-store and Apple Pay online.

Shopify is popular among independent retailers, with its software allowing them to set up an ecommerce storefront to process online sales, manage inventory/product listings and process payments – including Apple Pay. But currently the hardware and credit card readers Shopify supplies to stores don’t accept Apple Pay.

The cap for contactless transactions – due to rise to £30 in September – is another hurdle to be cleared. Limiting consumer spending to some drinks in a pub or a latte at their local café will also lessen the adoption and usage numbers.

But to accept higher-value payments, retailers will need to spend money and invest in terminals enabled with Consumer Device Cardholder Verification Method (CDCVM) technology. This adds an extra layer of security in processing mobile payments – and as it’s supported by payment card networks, it removes merchants’ liability for fraud when used for Apple Pay transactions.

Combined, these challenges emphasise why independent retailers should focus less on supporting Apple Pay and more on their overall mobile strategy.

With global mobile commerce predicted to reach $298bn in 2016 – and more than doubling to $626bn by 2018 – the key challenge for retailers is ensuring the offered shopping experience is designed with mobile phone users in mind.

The traditional mobile shopping experience usually involves taking a typical online store viewed on a laptop and then cramming into a small screen. This simply doesn’t work.

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A mobile-friendly designed mcommerce site is essential, as is a smooth checkout process. Requiring mobile shoppers to enter sensitive information like credit card numbers onto multiple forms on multiple screens isn’t popular with consumers.

This is where mobile payment solutions like Apple Pay, PayPal, and Google’s Android Pay come into the picture. The secure, single-touch pay button provides an easier mobile web checkout – and new software enables retailers to integrate single-touch mobile payment capabilities into their mobile apps.

Fewer taps and screens means more increased sales.

Looking down the road, Apple will begin supporting the addition of merchant’s loyalty cards to a user’s Apple Wallet – and it’ll also be available from Android Pay when it to the UK.

In the US, vertical markets like travel and hospitality have enthusiastically embraced new mobile capabilities. For example, Marriott Hotels enable guests to use Apple Pay for check-in to bypass the lobby line – or to instantly pay for dinners and drinks by the pool (the US isn’t restricted by a contactless spend cap). Others are rolling out mobile phone keyless entry for guests that eliminates the lost-card scenario and appeals to the mobile centric millennial generation.

The key point for retailers to take in is that consumers use different mobile devices, have different shopping habits and choose different ways to spend their money. They need to support mobile payments across all device types, not just Apple Pay, to achieve a greater opportunity for increased sales.

Aligning the scale of their business to the growing demands of today’s mobile centric shopper will greatly impact their competitive edge and ability to stay ahead of today’s digital curve.

Henry Morland is chief product officer at Brightpearl