Apple Pay – who really benefits?

13 July 2015

Michael Bowell

Michael Bowell

Consultant

This month has been hinted as the month where Apple will release its convenient Apple Pay system in the U.K. This uses a similar technology to the contactless payment technology which was originally rolled out onto standard bank cards.

With Apple Pay, users can use their phone instead of their bank cards to carry out small transactions below £20 (£30 in September) all verified by their finger print. My question today is; why have they done it? Especially considering that other operating systems have offered the technology first and it’s not really taken off. So if Apple is releasing the functionality on their devices, they must see tangible benefits.

Do consumers benefit? For me, this is making a really useful technology even more convenient. When I can, I use contactless when paying for small purchases. It’s not significantly faster than using the standard payment pad in stores, but it is a little bit quicker. Personally I don’t enjoy spending a lot of time at the payment counter, especially if I have been queueing. So often by the time I have reached the point of paying, all I want to do is leave the store. Thus contactless is doing one really big thing for me, improving my customer experience. The reason why it is improving my customer experience is because it comes right into play when my mood could hit a turning point and gets me exactly what I want, which is out of the store faster.

Do I benefit?

What benefits is Apple Pay going to bring to me? Well first off, I can store more than one card on my device. The big benefit here is because I am a cyclist. I often go out for a really long training ride on a Saturday morning with my phone for music and a debit card to pick up a drink if needs be or if disaster strikes, the tube home. Now with Apple Pay I can leave my cards where I know they will always be, safe in my wallet. I can then pay for things as and when I please with any card I have securely stored on my iPhone. The next benefit is the simplicity to use it. Like many people, I commute to work on a Monday morning. At that time in the morning, Starbucks is always busy with fellow commuters trying to force themselves awake with a cup of caffeine which means one thing…a queue. Since the invention of the Smart Phone I very rarely just stare into space when I’m queuing so nine times out of ten, I will be reading the news on my phone or sending an email. Not having to put my phone away, to get out my wallet and then a debit card out reduces the effort I need to put in to get my coffee.

On reflection these may seem as very minor wins, but when you add them all up together you would be surprised the impact it has on your daily mood. Just picking apart that last sentence and other pieces from this blog about what Apple is doing is very clever. They are tying into emotional points in your daily routine which will make you feel good about your device so that your next phone is an iPhone. Other operating systems do have the contactless payment capability but in my opinion their marketing didn’t really hit home with its consumers.

What will Apple get out of it?

So, why should Apple go to a large effort to implement such functionality on the iPhone? After all, integrating into anything which is financial is shrouded in massive security requirements as well as the recent exposure around data security with Apple has left people feeling a little nervous. So one thing is for sure, getting this over the line in Silicon Valley would have been an uphill battle. Then there is the aspect about return on investment. It will not cost you the consumer to use this functionality on your device, and of course it won’t…otherwise you wouldn’t use it.

One point I previously touched on was the fact that Apple are making you feel great about your device when you use it. Essentially that is what makes me loyal to the brands I buy, how I feel about them when I use them. So you could argue that Apple have gone to an expense to secure your loyalty.

From a cost perspective, you could probably argue that Apple is requesting a license fee from the banks to support their cards. But I doubt that would recover the cost of the R&D that Apple put into this technology. So the dangling open question is, did Apple just do this for loyalty?

Yesterday whilst reading up on the technology I stumbled across something which really made me think:

On first reflection of these two sentences it seems that Apple just simply ditches the transactional information. However on closer analysis of this, they have worded this in a very clever way. So the transaction can’t be tied back to you, but it doesn’t say anything about being able to tie the transactions back to your attributes which can’t personally identify you, but describe you. What I mean by this is that they may well be storing the data in a way that you will never be individually identified. For all the data scientists and HANA experts out there, can you imagine the power of this information…? They won’t be able to run a report on what Mike Bowell purchased last weekend, but they will be able to report on what a 25-30 year old male from West London buys on the weekend.

Now walking into work, I did have a few doubts in my mind about this point. Surely Apple won’t be able to see the item detail of what you are purchasing as the transaction only holds information on the vendor, the cost and of course your unique identifier being the card? However this is still powerful information, in a number of cases it is still obvious what you are buying:

  • Starbucks
  • Wetherspoons
  • H&M
  • McDonald’s

Can you imagine giving this data to McDonald’s to assist with where they should put their next outlet? “Here is a report on the percentage of people who went to a pub within 1 mile who then went onto McDonald’s.”

Some people might think that this is a breach of privacy, but personally I don’t have a problem with it. If my assumptions are correct and they are simply storing my buying behaviour against my non sensitive attributes then the outcome can only mean good things for me as a consumer except for the fact that I might be parting with more of my money.

In summary

Everyone involved seems to be benefiting from this new functionality being launched this month. However the real take away winner, if my assumptions are correct is Apple. Apple is walking away with incredibly powerful data which was previously not attainable; a complete view of your buying behaviour for small day to day purchases. Of course your bank could have done this before, but what if your credit card isn’t from the same bank as your current account? Do you have a company credit card as well as a personal one? Just in these two scenarios, a hole appears in the data collected through your card, but it’s actually filled in if you put all your cards into your Apple device. Regardless of what card you use to pay for a purchase, Apple can collect that data and use it to work out what you are going to buy next.

Now extrapolate that data across a few hundred thousand people and put that data in the right place with the right analytics package on top and you could argue that you answer questions such as “If someone is buying a coffee at 6:30am in Stansted Airport, what are they going to buy next”. Very powerful indeed.

 

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