In February this year, Apple has launched a new payments service that lets merchants accept payments natively on an iPhone, called ‘Tap to Pay’. A Bloomberg report noted Apple’s acquisition of a startup, Mobeewave, which specialised in building this technology,
The service will be available first in the US later this year, followed by a phased international roll-out. Payments can be made through Apple Pay, contactless credit or debit cards, and digital wallets using compatible iPhones (XS and later models) – no additional hardware or payment terminals are required.
How does it work?
Previously, Apple payments required third-party hardware from a payments provider to accept contactless payments via an iPhone. Now, during checkout, customers are asked to hold their iPhones or Apple Watches near the merchant’s iPhone, making the payment securely with NFC technology.
So, according to Apple, with ‘Tap to Pay’, all merchants will need to take and process payments is an iPhone.
Tap to Pay uses the same Secure Element encryption as Apple Pay to protect customers’ payment data. This creates unique transaction IDs every time they make a purchase. Apple does not receive information about what customers are buying or who’s paying at the terminal.
The ‘Tap to Pay’ feature will be widely available in most retailers that accept Apple Pay.
Is Apple’s ‘Tap to Pay’ friend or foe?
Apple Pay is already accepted by more than 90% of U.S. retailers. This new capability will allow their customers to experience a more seamless checkout process. Tap to Pay on iPhone will also roll out to Apple Store locations.
This initiative is part of Apple’s strategy to boost the adoption of contactless payments in the US and then globally, as they plan to support all EMV contactless payments, including Google Pay.
As Apple plans to work closely with payment platforms and app developers to offer ‘Tap to Pay’ on iPhone to more merchants, this will mean a better understanding of local consumer needs and challenges.
With Tap to Pay on iPhone, businesses will be able to accept contactless payments in a secure, private, and easy way and also enjoy new checkout experiences using the power, security, and convenience of the iPhone.
This feature will be particularly useful for growing businesses, as no matter where you work, whether you are a salesperson at an online retailer or an entrepreneur, contactless payments will soon be available on a device you already own: your iPhone.
Is this the end of the POS?
This built-in payment solution will challenge some of the existing payment providers’ hardware, but there are several other options that go beyond what is possible with just an iPhone.
Besides contactless readers, there are also POS solutions like TRU POS for magstripe and chip cards. Eventually, all credit and debit cards may go contactless, but that hasn’t happened yet. As a result, POS readers will be able to accept payments that Apple’s Tap To Pay cannot.
Tap To Pay can only be used with iPhone XS and newer through the software version iOS 15.4 beta 2, while TRU POS readers can be used with any iPhone, which covers a much broader range of devices, including the iPhone 6, 7, and 8 models which are still very much in use in a lot of countries globally.
Apple’s focus on increasing payments offerings
‘Tap to Pay’ is not the only stride Apple is making in increasing its payments offerings.
Bloomberg reported last year that Apple was partnering with Goldman Sachs to launch a product called Apple Pay Later. Using this service, Apple Pay users would be able to make four interest-free payments every two weeks or spread over several months with interest, using the ‘Buy Now Pay Later’ (BNPL) model.
Due to the pandemic, BNPL has gained popularity as consumers look for alternatives to make purchases that are easier on their wallets.
We should keep an eye on Apple’s share of the BNPL market. This reported move validates the company’s growing customer base despite increased competition.
BNPL players use different business models and generate revenue in different ways, thus reinforcing the sector’s importance.
Interested in learning more about how to grow your business using BNPL? Get in touch with our team.
