What does Apple Pay mean for cash and cards?

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Although financial institutions were expected to be the first to offer the application, major banks, such as HSBC, have missed out on the launch of Apple Pay in the UK this week.

With HSBC responding that they will allow customers to use the app later this month, Halifax, TSB and Bank of Scotland all said that they had always planned to join in the autumn. This included Barclays, who have recently released their own payment system called Pingit. Despite this, NatWest, Nationwide, Santander, Ulster Bank and the Royal Bank of Scotland will be offering Apple Pay from this week.

The effect of Apple Pay on banks has already become a disputed topic as director of strategy at data company Delphix, Jes Breslaw, believes that the introduction of newer financial technology will hamper the success of more traditional firms. “Digital giants are moving fast to innovate and usurp the monetary capabilities previously seen as the preserve of big banks. It begs the question, what next? Apple bank? Google Loans? Amazon Insurance? In contrast, big banks risk finishing last in the race for the mobile wallet as they battle complex legacy systems, inadequate development environments, old methodologies and poor non-production data,” Breslaw said as quoted in Banking Technology.

Lu Zurawski, head of consumer payments EMEA at global payments company ACI Worldwide also agreed with this attitude and warned banks about adopting Apple Pay into their schemes. “The implications for UK banks are manifold: banks that move quickly to adopt Apple Pay will need to carefully consider the economics of this new scheme and accommodate other alternatives too, e.g. Samsung Pay, Android Pay or the Zapp platform,” Zurawski advised according to Banking Technology.

While some fervently believe that Apple Pay will dominate the banking industry, others are sceptical. Chief commercial officer of Secure Trading, Jens Bader, says that many people would still use contactless debit or credit cards in the future. “I think it is definitely premature to say that Apple Pay will be the death of cash and cards,” Bader said. Users of the iPhone 6, iPhone 6 plus and the Apple watch can pay for goods and services with the new Apple Pay system by touching their device on a contactless pad, while their identity is verified through their fingerprint, according to the BBC.

Banking Technology explains that the customer has to register a debit or credit card onto the app to be able to use it and instead of the actual card number being saved on the application, a unique Device Account Number is assigned, encrypted and securely stored in the Secure Element of the device. For security purposes, each transaction is authorised by a one-time unique security code.

Although these security measures are in place, some believe that the introduction of this app will attract more hackers to mobile payments. Mike Weston, chief executive of data science consultancy Profusion highlights that when storing personal information on devices, such as social media profiles, email accounts and now payment information, it is terrifying to think about how safe our data actually is, as explained in Banking Technology.

 

First published on Treasury Insider:

http://www.treasuryinsider.com/2015/07/15/what-does-the-apple-pay-launch-mean-for-banks/

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