Apple Pay: Promise + Pitfalls

Photo credit: The Verge

Apple made some big announcements this week, among them the introduction of Pay, a “breakthrough contactless payment technology” that will be available in October with the iPhone 6. Economists and analysts have published a number of reviews in the days since, documenting the technology’s innovations as well as potential roadblocks when it comes to security, merchant compatibility and the product positioning itself — but there are some competing opinions to consider.

Enhanced Security

While some may feel hesitate to entrust their credit information to a smart phone in light of recent cloud-hacking headlines, experts believe that Apple’s technology could actually be more secure than carrying around your credit cards. As Brian X. Chen and Steve Lohr report in the New York Times, Pay is already receiving rave reviews for its leverage of near field communication (NFC), a technology that allows for device-to-device wireless payment exchange. As they put it, “The new payment system could also drive faster adoption of a chip-based security feature called EMV, for Europay, MasterCard and Visa, the companies that first backed the technology.” EMV creates a unique code for every purchase, rendering the number nearly useless for other pursuits and eliminating the need to protect one single sequence (say, the numbers on your credit card) to protect your financial security.

Merchant Compatibility

“There’s one issue the company still has to surmount before it can kill off plastic for good,” writes Jacob Davidson in Time. “Right now, the vast majority of retailers lack the technology to accept the company’s new payment service.” Though he reports that only 22,000 out of about nine million U.S. merchants who use point-of-sale currently have the capability to support NFC technology, he also explores a number of factors that could accelerate its adaptation:

• Credit company incentives: MasterCard and other credit companies may be willing shoulder the costs shepherd the processes required to help major merchants acquire NFC technology. If credit payment becomes easier for more people, that’s ultimately a win for credit companies.
• Timing: Retailers are already facing an impending deadline to upgrade their systems to accommodate the new fraud-reduction technology of EMV — so now might be a great opportunity to knock out two birds with one stone to accommodate both.
• Loyalty: Building in enhanced loyalty program features as part of Apple Pay would show a direct benefit for retailers…and an extra inceptive for adaptation.

The Premise

Introducing the new iPhone 6 feature, Apple writes: “Gone are the days of searching for your wallet. The wasted moments finding the right card. The swiping and waiting. Now payments happen with a single touch.” But positioning traditional credit card payment as a hassle may be a mistake. Mocking this positioning, TIME’s Neil Irwin calls the described scene a “veritable dystopia,” adding “The idea is that instead of experiencing the misery of fishing around for a credit card, you put your phone up to a transponder and touch the screen, and your transaction is complete.”

What he misses — or perhaps, what Apple is missing — is that Pay does have the capacity to increase quality of life, even if it’s not solving a “problem,” per se. The problem  is actually in the positioning of this product, which should be more about convenience and streamlined living. Is it problematic to search for my wallet, find the right credit card, swipe and wait? Not really. (And presumably I’ll still have to find my iPhone in my bag, select the appropriate card, and swipe virtually and wait.)

But what Apple Pay does mean is one less “essential” item I need on a regular basis. Fancy dinner date that requires a clutch instead of a Mary Poppins-esque tote? No problem. Now I just need my phone and keys — clunky (but cute!) wallet can stay at home. Remembered that I need to pick up a carton of milk on the way home from the gym? Now I won’t have to make a separate trip out — I’ll have everything I need right with me and can pick it up on the way. Just as the iPhone eliminated the need to carry both an iPod/mp3 device and my phone in addition to my keys, Pay has the potential to streamline those essentials even further…and that’s plenty helpful.