Mobile Money Part 1: Apple Pay will break payments gridlock

Clement Teo/Forrester Research
09 Dec 2014

Last year, Forrester predicted that the Asia-Pacific mobile payments landscape was entering an exciting phase of development but would remain riddled by fragmentation in 2014 - and we were right. In countries like Japan and South Korea, consumers can use near field communication (NFC)-enabled mobile devices to pay for purchases at retail outlets, while businesses in other countries, such as Singapore and Australia, are experimenting with a variety of mobile payment options, including NFC, QR codes, and digital coupons.

In 2015, Apple will change all of this.

Apple Pay will accelerate payments and enable new customer experiences. With Apple Pay, the company is enabling merchants to create a faster, more seamless, and more secure web and mobile checkout experience than many competing services, such as Google Wallet.

But Apple Pay will become much more than a tap-and-pay solution; the technology that Apple Pay is launching in the US will integrate the Passbook app’s ability to manage digital assets like cards, coupons, tickets, and loyalty programs with new security, identity, and location tech enablers. This will eventually enable merchants worldwide to deliver a broad set of seamless yet engaging commerce experiences to the nearly 800 million consumers already in Apple’s ecosystem.

China and Australia will lead usage of Apple Pay on mobile. In China, UnionPay has joined the Apple Pay ecosystem; this unlocks an opportunity for Apple Pay to thrive there. And as it goes international, Apple Pay will begin to affect payments in Australia, a fast follower of US trends with a large base of Apple devices. The Reserve Bank of Australia believes that, while smartphones are still used in less than 1% of consumer-to-business payments, this could change as new NFC or Bluetooth technologies for point-of-sale smartphone payments emerge.

The other thing working in Apple Pay’s favor is better security features that will expand payment options for corporate users. The Apple Pay service offers contactless NFC payments, tokenization of card numbers, and a relatively easy and effortless user experience from the iPhone 6 and Apple Watch - secured by fingerprint biometric authentication.

In addition, Apple and IBM have partnered to offer enterprise users a solution for secure access to corporate data. These developments mean that enterprise bring-your- own-device users can tie their payments for hotel stays, car rentals, or airline tickets to their company’s expense systems. Apple Pay will remove friction from the process of submitting, managing, and paying employee expenses, ultimately improving everyone’s experience.

What will this mean for telcos? They will need to think holistically about mobile by designing timely and relevant offerings, based on location and contextual triggers, using multiple channels (e.g., email, social, apps, etc) to distribute wallet content, and look at Apple Pay as an additional enabler for their mobile strategies.

Clement Teo is senior analyst at Forrester Research

Seven incentives to change your game:

1. Fiddling over net neutrality while business models burn

2. Goodbye telcos, hello IDSPs

3. Cellcos remain their own worst enemy

4. Mobile Money Part 1: Apple Pay will break payments gridlock

5. Mobile Money Part 2: Wireless/digital finance earns additional interest

6. Plenty of room in 2015 unified comms market

7. Getting to grips with the IoT value chain

More coverage of 2015 predictions

This article first appeared on Telecom Asia Vision 2015 Supplement December 2014 edition

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