Apple is recognized as one of the most innovative companies in the world. However, with their Apple Pay offering launched last year, they are playing a surprising role: reseller for the credit card companies. This blog describes this current Apple
Pay situation and summarizes potential innovations which could change its course in the future.
Apple Pay has been (mostly) hailed
It seems generally true that Apple Pay has impressed most observers. Some media sites have
said “Apple Pay has done more for the collective mindshare of the adoption of mobile payments than any other single product or company has done in the last five years.”
Mobile payments—the ability to pay for goods and services at physical locations with your smartphone—was certainly not an original concept from Apple. Essentially, Apple took an existing market concept based around technology and products designed to get
people to pay with their smartphones, then embraced and extended it.
It is easy to understand why banks and payment networks love Apple Pay: it promotes additional usage of their existing debit
and credit cards. This love can be seen by the long list of
U.S. bank issuers shown on the Apple Pay Support site.
That said, others have not been impressed with Apple Pay. Harvard Business Review included an article on how: “Apple
Pay is Just a Big Giveaway to Credit Card Companies.” In stark contrast to how Apple has been a serial innovator, the author describes how, with Apple Pay, the company unfortunately decided to become a reseller for existing credit card companies.
“By launching Apple Pay as a reseller instead of as a disruptor, Apple is helping to perpetuate a credit card payment system that is obsolete, overly expensive, and absolutely unnecessary in the present day.”
Others, like Marc Andreesen, have said:
“Apple Pay is innovative, but in a way [it’s] very consistent with the status quo.” Andreesen remains more bullish on Bitcoin over the long-term.
What Apple Pay innovations should be coming?
Clearly Apple Pay is the first iteration of what may become a much more innovative product offering. Apple focused their initial Apple Pay design on the consumer—for added simplicity and security of mobile payments—while deferring other potential
design centers… like merchants.
Patty Seybold’s "Outside Innovation" blog lists seven things the company should consider changing
about Apple Pay.
If Apple Pay had been designed around merchant needs, then it would have enabled merchants to:
- Integrate with their reward/loyalty programs,
- Avoid high credit card interchange fees (by providing alternative and more cost-effective payment types), and
- Use their existing POS terminals (vs. working only on newer NFC-enabled ones).
Over time (and after many more consumers are using iPhone 6 devices with Apple Pay), Apple could decide to become more disruptive to credit card networks by adding new payment types. For example, direct payment from one’s bank account… which would compete
with existing credit card networks.
In addition, consumers should have the ability to opt-in—on a brand-by-brand basis—to decide to share their personal information in order to receive merchant offers/savings. We do understand the concept of “crawl, walk, run” for product development, and
these innovations would add more value to both consumers and merchants.
In closing, Apple now finds itself in uncharted waters with Apple Pay—that is, being a reseller vs. an innovator. However, the most valuable company in the world is likely busy working to change this situation in the future.
It will just need to “think different” from the current version of Apple Pay.
Let us know what you think.