Apple Inc chief executive Tim Cook describes a video of an American shopper using an iPhone to buy from a retail outlet as “so cool”.


However that doesn’t appear to be enough to revolutionise retail payment systems, as a study by CAN Capital found that a year on from the launch of Apple Pay in the United States, almost 87 per cent of small merchants do not accept it.

At the top end of the retail market, a Reuters survey of the top 100 US retailers found less than a quarter currently accept Apple Pay, while nearly two-thirds had no intention of adopting the technology this year.

So it will be interesting to see if Australians will break the mould and adopt the near field communication (NFC) technology, which can be utilised with either an iPhone 6 or Apple Watch.

Apple Pay is here

Apple Pay launched in Australia in November 2015. Only American Express cardholders are currently able to load their card details, either manually or using the iPhone’s snap shot function, and use the contactless payment system. 

Apple is also negotiating with major Australian banks that issue MasterCard and Visa cards to adopt Apple Pay, but it involves the banks giving Apple a portion of the $2.5 billion a year merchant fees market. All parties have kept negotiations confidential to date.

Perhaps a larger problem for Apple is that waving a phone or a watch at a terminal is just not enough of a change in the shopping experience to attract the masses, compared to waving a credit card in front of a terminal.

Where shoppers may be attracted is how the phone can also track purchases, and be tied into other apps to monitor patterns like spending impacts on household budgets. No doubt many more uses will be unveiled over the coming 12 months as the technology progresses.

But it’s not a game changer

As it stands, it’s certainly not a game changer, and Cook was wrong in January last year when he said “2015 will be the year of Apple Pay”.

Globally Apple’s competitors are not sitting back to wait and see what the evangelistic company will do next.

Google and Samsung are big in the digital wallet space, and PayPal has introduced its own NFC terminal.

Additionally MasterCard and US mega-bank JP Morgan Chase have banded together to develop a range of NFC products to challenge the smart watch, including rings, key fobs and sweat bands.

Chasing the competition

Earlier this month Chase upped the ante in the contactless payment game with the announcement it would launch its own digital wallet, Chase Pay, mid this year.

Chase Pay uses a QR code that can be scanned by the cashier, rather than NFC technology. However it has some other novel applications, like paying for dinner by taking a photo of the bill with your phone, and loyalty program discounts are applied at checkout.

The bank claims half of American households are customers, and its technology is not dedicated to its own terminals, but utilises many existing networks.

Furthermore, Chase has two other competitive advantages. First, it will preload its customer’s credit card details into its apps, so customers just have to accept the terms and conditions and start spending. Secondly, it has discounted the cost of using Chase Pay, to encourage merchant take-up. Chase claims it will drive down merchant costs across the payments system.
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