Deciphering Apple Payments is an Opportunity or a Challenge for the Mobile Payment Industry

The mobile payment industry is changing

According to the prediction of the Boston Consulting Group, the global retail payment industry revenue has reached about 750 billion US dollars in 2013, and is expected to maintain a compound annual growth rate of 7% in the next 10 years, reaching 1.5 trillion US dollars by 2023. Among them, emerging markets will be the main contributors to growth, with a compound annual growth rate of 11%, which is nearly three times (4%) of mature markets.

In the retail payment industry, mobile payment penetration is still low. At present, the total global retail payment transaction is about 82 trillion US dollars, of which mobile payment transactions total about 140 billion US dollars, accounting for only 1.7%, but its compound annual growth rate is more than 35%, much higher than other areas (such as cash payment) , PC-based online payment), mainly due to the popularity of mobile Internet and mobile intelligent terminals.

The online and mobile payment has brought a series of changes to the payment industry. First, payment institutions are becoming more diverse. In addition to traditional banks, acquirers, and card organizations, search engines, social networking sites, online and offline merchants, Mobile wallets and the like have also turned into payment institutions, making the ecology of the payment field increasingly complex. Second, the medium and process of payment has also changed. The original process requires the user to present the card at the time of payment, and now the card-related qualification information is stored in the account in advance, and the user does not need to present the card when paying, but needs to complete the payment in the account by using a terminal such as a computer or a mobile phone. And, the virtualization of payment media enables remote mobile payments. In addition, the traditional business model is also under tremendous pressure. The focus of competition has become a competition for mobile customer portals. New institutions and processes have also brought new regulatory policies and challenges to traditional pricing models.

In this context, in October 2014, Apple officially launched the NFC-based mobile payment function Apple Payment, through a simple interface and process, and based on fingerprint identification and built-in chip security certification, successfully realized the combination of convenience and security Experience. This topic will provide an in-depth analysis of Apple Payments and its impact on the mobile payment space.

How Apple Pays Works

Apple payments are currently mainly used for near-field payments (ie, using NFC for POS payments within the point of sale) and in-app payments (ie, payments to merchants using apps associated with Apple accounts), and online payments are not yet available. Compared with other payment methods, Apple payment has five characteristics:

★ Convenient interface: The convenient payment interface is presented through Passbook, which can conveniently use different bank cards, and can be used in conjunction with coupons in the future.

★ Biometric authentication: unlock the phone by fingerprint identification and authorize payment.

★ With the traditional payment “access”: through traditional debit cards and credit cards such as Visa and MasterCard, merchants can use existing payment platforms and NFC terminals.

★Passwords: The phone has a dedicated chip to store the specified password, and the password is stored outside of Apple's server.

★ NFC contactless payment: you can make a payment by tapping the mobile phone at a close distance from the point of consumption, without touching (such as swiping).

Specifically, when the user needs to use Apple to pay, it can be completed in three simple steps: First, the mobile phone is close to the NFC terminal, and the mobile phone automatically selects the preset primary card; then, the finger is placed in the TouchID area. On the mobile phone, the mobile phone automatically performs fingerprint verification and transmits the passwordd card number to the payment institution; then the user can see that the payment is accepted or rejected, and the payment is completed.

Why is Apple Paying optimistic?

Among the many mobile payment products, we believe that Apple's payment has a good market prospect, mainly for the following reasons:

First of all, Apple pays very much in line with the payment habits of American consumers. In North America, more than 70% of non-cash payments come from debit cards and credit cards, and 45% of US households have more than three bank cards, which are heavily dependent on card payments. Apple pays for payment by electronically using traditional payment channels, such as Visa, MasterCard, and other traditional debit cards and credit cards. On the one hand, it maintains the existing user habits, and on the other hand, it also passes fingerprint authentication and password authentication. Such means have improved the security risks of traditional card payment lacking passwords and chips.

Second, Apple Payments aims to work with existing stakeholders to optimize the existing payment experience and is therefore less resistant. Apple Payment only enhances the customer experience in the final stage of payment, does not touch the existing payment industry chain, and cooperates with card issuers, card organizations, acquirers, and merchants in a positive manner. At present, Apple has entered into agreements with more than 500 card issuers, covering 85% of total bank card transactions, as well as 70% of acquirers, three major card organizations and including Starbucks, Macy's, and Whole Foods. 220,000 merchants including McDonald's established cooperation.

The card issuer is the only party that will be financially affected. In every $100 payment, the card issuer will need to pay an additional $0.15 rebate to Apple and a card processing fee of $0.07 to $0.15 to the card organization. , its income may be reduced from the original 1.65 US dollars to 1.42 ~ 1.50 US dollars, see Figure 2-4. However, most US card issuers still believe that this financial loss is worthwhile, because the cooperation with Apple, which has 40% of the smartphone market share, means that it can maintain its control in the irreversible trend of mobile payment, even Apple payment may be used to further increase the proportion of non-cash payment, while improving the security of payment and preventing credit card fraud, saving the cost of reissuing and renewing cards, and obtaining joint marketing opportunities.

Finally, Apple's payment of the node is coming up with a new EMV standard (the new EMV regulations will be implemented in October 2015), the regulator will require payment terminals to be upgraded, and the NFC module is expected to be implanted in most payment terminals. It is expected that starting in 2017, NMV terminals in the United States will be able to achieve NFC payments, further clearing the obstacles for Apple payments.

For Apple itself, although the direct income generated by Apple Payments is minimal, the payment account can further strengthen Apple's ecosystem and have unique strategic value. By then, iTunes will have 800 million accounts with user credit card information and fingerprint identity information.

How to deal with the mobile payment market?

After Apple's payment was launched, many other organizations also faced the problem of how to compete.

In February 2015, Google acquired the three major US carriers, AT&T, Verizon Telecom and T? Mobile jointly developed the technology and patents of the mobile wallet company Softcard to improve Google Wallet. Prior to this, the development of mobile payment in the field of mobile payment has been tepid. Google hopes to pre-install Google Wallet on the Android phones of the three major operators, but the three major operators have started to develop their own payment tools through Softcard. In the face of the pressure of Apple's payment, the two sides finally chose to cooperate. Since April 1, 2015, Google Wallet has replaced Softcard as a pre-installed payment tool for Android phones on the three major carriers, which is expected to rapidly increase market share.

Almost at the same time, Samsung acquired the mobile payment technology company LoopPay, and in March 2015 officially launched the "Samsung Payment", using traditional magnetic field technology, mobile payment can be realized on the old magnetic stripe card machine, and the payment process and The convenience is very similar to Apple. Compared with Apple Pay, this technology does not need to modify the existing POS machine (LoopPay said that the technology can already be used on 92% of POS machines), and does not need to cooperate with a specific bank, so the scope of adaptation is very wide.

At present, several giants have begun to sprint in the global mobile payment market: the United States is the advantage market for Apple's payment, and Samsung Payment has signed a cooperation agreement with UnionPay to take the lead in China and cooperate with MasterCard to expand the European market. In the next 1-2 years, global mobile payment will usher in a peak of development.

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