Member Article

Should small businesses take a bite out of the Apple Pay market?

As Apple Pay arrives in the UK today, Bdaily’s associate editor, Ellen Forster, explores whether the new addition to the contactless payment market will be a fruitful one for small businesses.

What is Apple Pay?

This morning, Apple announced the release of its contactless payment system for iPhone 6, 6 Plus and Apple Watch users. Customers can now make payments under £20 on their smartphones with the tech giant’s new contactless wallet. Despite HSBC’s technical difficulties, several businesses have already jumped on the Apple Pay ‘apple cart’, including East London coffee shop Shoreditch Grind, which is nestled in the heart of the city’s tech hub on Old Street.

Security and privacy is at the core of Apple Pay. When you add a credit or debit card to Apple Pay, the actual card numbers are not stored on the device, nor on Apple servers. Instead, a unique Device Account Number is assigned, encrypted and securely stored in the Secure Element on your device. Each transaction is authorised with a one-time unique dynamic security code.

What do the experts think?

Danielle Levitas, SVP Research & Analysis at App Annie believes Apple Pay has the potential to “shake up: the banking industry, she said:

“Compared to the rest of Europe, the UK is a leader in mobile banking. In Q1 2015 downloads of the top 10 retail banking apps in the United Kingdom were almost twice as high as those in France and three times as high as Germany.

“This success and proliferation in the UK shows there is an appetite for change in how people pay for goods and the increasingly important role of mobile.

She also believes that Apple is a notorious trendsetter, but it must be aware of competition in the contactless payment sector: “Apple is renowned for streamlining and popularising concepts, just think of its impact on MP3 players, digital music and media, smartphones and mobile apps. Although Apple Pay is not the first of its kind, the company’s reach and ability to evanglise is central to driving mobile payments adoption.

“Apple doesn’t need to have a monopoly in payments to drive change in consumer behavior and retailer POS systems. Delivering a best in class service that is widely promoted, Apple has the ability to turn another sector on its head.“

Jason Richelson, CEO and Founder of Shopkeep, defies the belief that small businesses will not see a material impact from Apple Pay. He said:

“Predicted consumer adoption rates will undoubtedly dominate headlines following the UK launch of Apple Pay today, but it’s on the other side of the counter where we see the really interesting story. In research carried out by ShopKeep, the vast majority of smaller consumer-facing businesses with 1-50 employees are positive about Apple Pay, but don’t believe it will have a material impact on how they operate.

“Our experience in the US says this thinking is flawed. Business owners in the US that have been quick to embrace mobile payments are growing three times faster than the national average, and going out of business much less often (5% fail within one year vs the 25% national average).

“There are several factors that lead us to predict consumer adoption rates that dramatically outpace the US precedent: the early adoption of Chip and PIN; the comparative success of contactless cards; the fact that the UK now spends more on card than cash; and the decision by TFL to accept this form of payment on London’s public transportation. People will expect cashless transactions wherever they go and if smaller business in particular want to prosper, they must embrace the technology.

“These systems have become readily available and inexpensive over the last few years and implementing them will assist in delivering an improved customer experience. Put it this way, any business that wants to exist in the future has to prepare for it.“

What do small businesses think?

It’s impossible to deny the impact online payment solutions have made upon the UK’s small businesses in recent years. Thanks to services like Amazon Payments, e-commerce companies are able to embed safe and secure payment systems into their website. Big names like Amazon and PayPal incite notions of trust among customers, and Apple will see a similar effect with its new release.

Currently, Apple Pay does not charge any extra fees to accept payments, however businesses may need to install a contactless point of sale if they don’t have one yet. It’s not only bricks and mortar stores which are set to benefit from the roll out of Apple’s contactless payment system, several online companies have already signed up. ‘Letterbox flower delivery service’ Bloom & Wild is one of the first UK ecommerce companies to add Apple Pay to their iOS app, meaning consumers can now open their app, choose blooms, order and send flowers in just 10 seconds from the Bloom & Wild app.

The Logic Group, a payments service provider that enables brands to accept and protect customer payments across any channel via a single platform, today announced it will offer its customers access to Apple Pay when it launches in the UK. Apple Pay is transforming mobile payments with an easy, secure and private way to pay.

The Logic Group’s Managed Payment Service, Solve Centurion will enable companies to offer Apple Pay as a way for customers to pay for goods and services as part of their protected payment service. Customers of The Logic Group who currently accept contactless payments will be able to accept low value (less than £20) and high value (above £20) Apple Pay transactions.

“Payment innovation is crucial for the retail sector, enabling merchants to meet their customers’ expectations and increase service levels and convenience,” said Marc Pettican, Managing Director, The Logic Group. “The Logic Group was the first Payments Service Provider (PSP) to deliver Chip and Pin payments to companies in the UK, and we’re delighted to be one of the first PSPs to deliver Apple Pay as well.”

The Logic Group, a payment service provider, recognises the convenience that mobile payments will bring to consumers. In order to improve the customer payment experience within their own stores and shop floors, many of them are keen to ensure their payment service credibly supports Apple Pay.

Andy Chalklin, CIO Pret A Manger said:

“I am pleased to say that through The Logic Group’s service, Pret customers will be able to use Apple Pay from day one across all of our 300 UK shops, including on purchases above the £20 contactless limit,“

What does Bdaily think?

In conclusion, Apple Pay seems like a win win situation for the small businesses which are best placed for the adoption of new digital technology. Right now, all we can do is look forward and predict the success (or failure) of Apple’s new payment service based on our experiences with other similar technologies like chip and pin and PayPal. One thing’s for sure, the industry is moving fast and small bricks-and-mortar businesses, particularly those in retail and hospitality, will risk falling behind if they don’t adapt to changes within the payment and banking sectors.

What do you think?

Drop us a comment below or get in touch direct at ellen.forster@bdaily.co.uk to share your views with the Bdaily team.

This was posted in Bdaily's Members' News section by Ellen Forster .