A big problem holding back mobile payments is a "chicken-and-egg" issue that Apple Pay's U.S. rollout and pending debut in Europe can reverse.
Digital wallets are useless to customers if shops dont take them and no shop will accept payment with them if their customers don't use them. And to date the digital wallets mentioned above havent exactly set the world alight or had retailers rushing to encourage customers to use them.
But that could be about to change with the entry of everybodys favorite tech behemoth, Apple. Apple Pay was launched October 2014 and is rumored to be set for roll out across the U.K. and Europe very soon.
Apple Pay is a mobile payment and digital wallet service that lets users make payments using the iPhone 6, iPhone 6 Plus, Apple Watch-compatible devices iPad Air 2, and iPad Mini 3. So were talking just about every Apple product that has been released in the past year or so.
The art in Apple Pay is that it doesnt require Apple-specific contactless payment NFC (near-field communication) terminals. It works with Visa's PayWave, MasterCard's PayPass, and American Express's ExpressPay terminals.
Users can make tap-and-go payments from their smartphones at these retailer terminals of which there are an estimated 200,000 in the US. As a mark of its game-changing potential Apple Pay saw one million activations in its first three days following launch.
The design of Apple Pay has been well received. And its partnership moves have been clever. By partnering with nearly all the leading U.S. banks, and many big retailers and app makers, its ensured that users can find places that accept Apple Pay as a payment method.
Apple Pay has also cut through the confusion in the mobile payments market and made it easy for users to actually make smartphone payments. The interface is slick and the security is tight. But that said the security is truly yet to be tested.
People want simplicity and people want security and to date that is what Apple has provided.
The core advantage with any contactless smartphone transactions, as provided by Apple Pay, is the potential for greater security if payments are made with phones using either built-in hardware, software or SIM-based tokenization capability.
Certainly the groundswell is there to give digital wallets traction. At a rough estimate there are something like six billion mobile phone subscriptions on the planet and one billion smartphones.
And of course industry pundits have weighed in with their predictions. Deloitte, for instance is predicting that by the end of 2015, 5% percent of the base of 600-650 million Near Field Communication (NFC) equipped phones out there today will be used at least once a month to make contactless in-store payments at retail outlets.
And in Japan over 10 million mobile subscribers are already paying for purchases with their smartphones. As every man and his dog rush into the mobile payment space the number of mobile payment systems has increased dramatically and it can be confusing.
Of course weve all heard of Google Wallet and maybe even Square which provides small businesses with an appendage that plugs into the headphone jack of a mobile phone and allows merchants to swipe cards and take payments. Payments can also be taken directly from the Square app on customers' phones and the company has bagged a lucrative deal with Starbucks.
Amazon and PayPal are also in the space and alongside Google are trying to build their businesses in the physical world.
However what these payment platforms, including Apple Pay, reveal is that the market is characterised by head-spinning fragmentation. Certainly Android devices should be getting in on the act given that the devices can be bolstered with robust security.
Apple Pay has raised the bar with its security method but it will only be when mobile providers get together and create a common mobile wallet service for all the Android devices out there that mobile payments will truly make inroads. Security may have ramped up a few notches ensuring greater user confidence but dont ditch your purse or wallet just yet.
Steve Bell is a security expert and writer for BullGuard, an Internet and mobile technology company.
