The threat of Apple Pay

By Nicole Miskelly | 17 September 2014

Last week, Apple announced that its new iPhone 6 includes a payment mechanism that allows users to pay for products by tapping it against a terminal or opening an app when shopping online. Apple Pay uses stored credit or debit card information to complete the transaction electronically, without having to type in payment details or addresses. Since revealing its entry into the finance sector, Apple has gained a surge of both positive and negative comments.

The threat of Apple Pay is evident within payments industry. PayPal ran an advertisement this week stating, "We the people want our money safer than our selfies". This message is thought to be referring to Apple’s recent iCloud hack, which led to nude pictures of celebrities being leaked. However, PayPal isn’t the only company that is questioning the impact of Apple Pay on their business, many banks have questioned what Apple Pay will mean for their branches.

While some banks are worried that Apple Pay or similar new services will make their branches less essential, banks that  issue credit cards have been looking at the new system as a way of steering more customers to credit cards from cash. The Financial Times (FT) reports that US banks are currently in a marketing race to persuade users to choose their cards as the default option under Apple’s new payment system before its launch next month.

According to the FT, the competition is heating up between the largest US card issuers (JPMorgan Chase, American Express, Bank of America, Wells Fargo and Citigroup) to gain an advantage by nominating their card as the default card on Apple devices. Apple is keeping its cards close to its chest and although banks don’t yet know the full functionality of Apple Pay, many believe it will result in a default card being selected by customers, rather than browsing through a virtual wallet of eight payment options.

The FT reports that Apple is known for its strict control over how its products are marketed by partners in other industries (such as mobile phone operators) and marketing staff from the banks are due to meet at Apple’s headquarters next week, to receive strict guidelines on how they can advertise Apple Pay to their  customers.

Although some mobile phone partners are happy to advertise the Apple brand, the FT mentions that others have voiced concerns in the past about the Apple brand overtaking their own which has broken down their relationship with their customers. In a time when banks are keen to preserve their own identity whilst becoming more customer-centric, banks should weigh up the pros and cons of Apple Pay because on one hand, keeping up with the latest innovation in technology and increasing revenue is a great idea, the downside of potentially losing brand identity and disconnecting with customers could be catastrophic. 


By Nicole Miskelly, bobsguide Lead Journalist

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