After months of speculation, it was finally announced that Apple Pay would be launched in the United Kingdom in July of this year. With multiple organisations having already given their support to the payment system, is Apple about to change one of the world’s biggest banking hubs? Patrick Brusnahan investigates
Since its launch in the United States last October, many have tried to deduce where the tech giant’s payments solution will launch next. As it turns out, it is set to hit the shores of the United Kingdom this summer.
Apple Pay will support UK credit and debit cards from American Express, MasterCard and Visa Europe, issued by some of the UK’s most popular banks, including first direct, HSBC, NatWest, Nationwide, Royal Bank of Scotland (RBS), Santander and Ulster Bank. Bank of Scotland, Halifax, Lloyds and TSB are set to follow later in the year.
Not only that, but Apple Pay can be utilised wherever contactless payments are accepted, such as Marks & Spencer and the Post Office. In addition, Transport for London (TfL) has also announced its acceptance of Apple Pay.
The beginning of something new
Nanda Kumar, CEO and founder of SunTec, believes that the introduction of Apple Pay to the UK market will make great changes.
When talking to RBI, he says: "The whole of the financial ecosystem has to be redefined."
Simon Black, CEO of PPRO Group, agrees. He tells RBI: "The recent announcement that Apple Pay is finally coming to the ULK will no doubt spur the mobile industry to adapt towards mobile and contactless payments at a faster rate. The UK already has the highest penetration in Europe for point of sale devices that are ready to accept contactless and mobile payments.
"Although mobile payments is still in its infancy, the explosive growth of contactless payments in the past 18 months means that in just a few short years from now, payments via smart devices are likely to be just as commonplace as paying by cash, debit or credit card today."
Kumar believes that the main segment to benefit from this development will be the consumer. He says: "Fundamentally, I would say the number one beneficiary is the customer because this increases ease and security when making payments. It also offers convenience. Splitting bills, multiple wallets on the same account, this is just the tip of the iceberg.
"Once the ecosystem is captured, Apple can be implemented with anybody, so the main beneficiary is definitely the customer. NFC is making the whole experience seamless. The fact that they’ve already been attached to companies like Transport for London, even that experience is becoming seamless."
One question yet to be answered is the effect Apple Pay in the UK will have on banks. While it may not necessarily be a competitor, it seems set to make a large splash in the financial sector.
Kumar says: "For the time being, it’s definitely a benefit for banks because Apple is not challenging the banks’ position. Authorisation still needs to happen on the bank’s end following the same payment ecosystem as their cards. It is only going to increase transactions.
"The couple of banks that consumers use as their primary banks are the banks that will definitely benefit. There are a few who will benefit immensely. I’m not going to say that all banks will benefit, but it depends on which bank’s card the customer puts as their primary card. If I have five cards, will I divide all of my Apple Pay transactions between cards? Probably not."
Black says: "With digital technology rapidly changing how customers now bank and pay whilst on the move, banks are working to be at the forefront of that change. We are currently living in a fast paced society, so providing customers access to their bank accounts via their smartphones is a much more convenient way of banking in comparison to the traditional banking experience.
"The way we bank will continue changing – and for the better, and new technologies including Apple Pay will allow customers to have a closer relationship with their bank than ever before. Banks therefore must strive to adopt these new innovations, not for change’s sake, but to deliver simple, secure and convenient personal banking for those who matter most – the consumers."
However, banks should be wary. Kumar says: "Maybe, at some point in time, if Apple can easily offer transactions that won’t go through the banks, or offering lowers transaction fees, this could be a long term cost to the banks. It depends on how Apple wants to play their cards. I’m not saying it will happen. It depends on regulatory restraints and how Apple wants to enter the ecosystem."
Kumar also believes this will show the strength of the UK market. He continues: "If you look at it from the UK’s perspective, this is a definite sign of the vibrancy within the financial system here. There are a lot of legacy banks in the UK and not everyone is on board. At least for UK consumers, mobile payment systems are not new, but another level is added when you consider Apple Pay and the Apple Watch."
Black concludes: "As the world of personal banking moves increasingly into the virtual world with mobile payments and banking apps a major force behind this evolution, the need for cash and physical banks will be even less. Perhaps by 2025, there will be no branches left and the way we bank will be entirely virtual."