Corporate Insight has been tracking the growth of mobile finance since the very first mobile trading sites launched over a decade ago. Since 2012, our Mobile Monitor subscription research service has closely tracked a cross-industry group of leaders and other noteworthy firms within the financial services. However, even as mobile adoption has steadily grown, the concepts of mobile payments or mobile wallets have struggled to gain traction among firms and consumers. Apple has long been thought to be a potential game-changer, though.
That’s not to say that clients see mobile as a view-only account access channel. While our surveys consistently show that reviewing account balances and history are by far the most common activities among mobile banking and brokerage clients, they also demonstrate significant desire for and usage of transaction capabilities. Tools like funds transfers, check deposits and P2P payments will continue to grow in popularity, particularly as technology-forward Millennials – including a significant number of mobile-only clients who do not regularly use a desktop or laptop computer – increase in wealth and prominence.
However, despite heavy investment from technology giants, e.g., Google Wallet, and an array of startups, no single solution has emerged to replace traditional credit cards or cash. There are significant challenges for those who are making the effort. New payment systems must reliably work as advertised, be universally available at point of sale, and above all, maintain security. Of course, all new technologies must also clearly address the question of what compelling problem they solve for users. What is the major advantage of mobile payments over a good old fashioned wallet?
As part of the release of its latest iPhones, iPads and iOS, Apple unveiled a new NFC-powered Apple Pay system. Analysts had been expecting an NFC chip in the last few generations of iPhones, and because of Apple’s market share and leading position in the mobile development cycle, this technology has finally been brought to the forefront. Anything Apple does generates a lot of buzz, but Apple Pay offers strong features and experience that could bode well for the future of the mobile wallet.
Perhaps most noteworthy is the buy-in from financial services firms, whose cards and networks are an integral part of the Apple Pay process. The Apple Pay homepage boasts the logos of the largest credit card networks – Visa, MasterCard & American Express – and banks – Bank of America, Capital One, Chase, Citi & Wells Fargo – with more firms “coming later this year.” Corporate Insight’s Credit Card Monitor has seen many of those firms cross-promote Apple Pay on their own websites. Capital One even introduced a brand-new mobile app, Capital One Wallet, designed to integrate Apple Pay details and alerts. Partnerships with these cards and payment networks is a big step.
Apple Pay also addresses other concerns that have prevented mobile wallets from becoming mainstream. For instance, users authenticate each transaction using Touch ID fingerprint recognition, an effortless biometric verification method. Beyond point-of-sale security, Apple Pay touts other improvements in the small-scale case of loss or theft, or rarer but highly-publicized data breaches. Card numbers are never visible within Apple Pay or shared with merchants, who receive a heavily-encrypted device account number and one-time code in its place. Tactics such as these lead to the claim that Apple Pay offers “more secure payments” than traditional methods or competitor apps.
Apple is taking on a challenge that many other firms have struggled with for years. The Apple brand as well as the program’s unique features certainly help legitimize the concept of the mobile wallet, with the potential to revolutionize the shopping experience the way it has music, telephone and mobile computing. As for competing mobile payment systems, they may benefit from increased publicity and acceptance, or be crowded out if Apple Pay truly takes off.