On Tuesday Apple revealed it’s long anticipated iPhone 6, and among the many hardware updates, it now has a Near Field Communication radio, or NFC. Apple announced that NFC will be used with the TouchID fingerprint scanner for contactless payments, in a system called Apple Pay.
NFC is cool, but widespread support is still many years away. 10 years from now, will I be able to stop carrying a credit card? Probably not.
While the speed of contactless payments will be a nice convenience, it’s not a killer app. Consumer demand is not going to drive adoption.
The sellers are going to drive adoption.
A big benefit of Apple Pay is the ability to charge a customer’s credit card in your own app. This is different from in-app purchases, which can only be used for buying digital content, and Apple collects a steep 30% commission. (which is getting harder to justify)
Apple Pay, however, is free for developers to use. That’s right, no commission. And it can be used for purchasing physical goods and services.
OK, so what? Any app could do that for years. It just needs the user to create an account (username/password) and input the credit card info. However, that’s a decent amount of friction to make a purchase. Apple Pay is one-touch to pay. No account creation, password, or data entry.
But more importantly, none of that information needs to be transmitted or stored by the app (or brick and mortar retailer). Apple Pay is using one-time payment tokens, which means they can’t be stolen and reused like a credit card number.
This enhanced security is the other big reason sellers will use Apple Pay.
It seems every week another major customer data hack is revealed. By using Apple Pay, the seller doesn’t need to store usernames, passwords, credit card numbers, or any customer data at all to accept payments.
Imagine this story next year: Millions of credit card numbers stolen from major nationwide retailer. Cancel your card, unless you used Apple Pay.
It’s in the the credit card companies and retailers best interest to adopt Apple Pay. The cost will be minimal compared to fraudulent charges and class-action lawsuits of another hacker attack.
So from an iOS developer’s perspective, what does this all mean? Well, a lot more money is going to be flowing through apps, very easily and without the security risks. The more money spent while using apps, the more valuable those apps become.
Also, there’s been a lot of angst in the indie iOS developer community on the difficulty of making money in the App Store. I believe Apple Pay could help open some new business models for us. No commission fee is a great start.
Next time you pull out your credit card, take note if NFC payments are accepted.