Introduction
It cannot be denied that modern information-based market is changing incredibly fast and new technologies are making a significant contribution to this change. It is not only the modern scientific progress that encourages this process but also the competition existing in the market. At the same time, while it appears to be impossible to keep up with market leaders without introducing new technologies, innovation is an extremely costly and risky activity the results of which may be difficult to predict. Innovation, therefore, has always been a combination of opportunity and risks. Successful companies like Microsoft and Apple are actively promoting new technologies and implement them to provide their customers with new products and find new opportunities for themselves (Bao, Berkowitz, and Wren 290).
One of the directions that modern technology is aimed at is electronic currency and mobile payment. Currency is no longer associated with bills and coins as we have learnt to realise that money is just a token, “a unit of value that can be earned and used in a certain economic system” (Swan 71). Therefore, currency is supposed to be a means of storing and exchanging value and, since it is used extensively in modern world, the technologies that are aimed at facilitating these processes are in great demand (Chiejina and Soremekun 53). This is exactly what mobile payment has been invented for.
Believing that it is the technology of future currency, companies like PayPal, Google, and Softcard have become mobile payment services providers (Shen and Yazdanifard 488). Apple has decided to enter this competitive yet promising market as well, launching its new application called Apple Pay. We are going to describe this application and the technology it uses in order to analyse the opportunities and the drawbacks of implementing this kind of innovation.
Defining the Technology
Apple Pay is an application for iPhones, iPads and Apple Watch that uses the technology of Near Field Communication (NFC) to perform contactless payments (Arthur par. 12; Swan 2). NFC is “a set of standards governing the establishment of radio communication between devices by bringing them close to each other (within a few centimeters) or touching them together” (Chiejina and Soremekun 54). Its use is not limited to contactless payment only; it can be utilized, for example, to access control or collect and exchange data which can also be useful for NFC-enabled mobile phones (Chiejina and Soremekun 54). In order to perform payments with the help of NFC, an application provides its users with the opportunity of integrating their credit cards into mobile phones and then performing contactless payment through a compatible payment terminal.
Organizational Benefits
Most benefits of Apple Pay that have been highlighted by both its manufacturers and researchers are time-saving, convenience, “coolness” and safeness. It is obvious that these benefits are mostly aimed at satisfying the customer, but as long as the application is appreciated by the users, implementing it is in the company’s best interests.
It is faster. NFC payments are supposed to be very quick: a user only needs to integrate the card once. After that, payments become fast and easy and require only putting the phone closer to the payment terminal (Shen and Yazdanifard 488). The authentication of payment for Apple products does not take much time either, as the customers simply need to confirm their identity with the help of the fingerprint scanner that is used by the devices (Hern par. 9; Arthur par. 2).
It is convenient. Nowadays mobile phones are not only popular, they are indispensable. Initially meant for phone calls, they incorporate more and more services every year which only increases their value in customers’ eyes. Having the opportunity to perform payments with the help of a device that is always at hand is extremely convenient (Chiejina and Soremekun 54-56; Shen and Yazdanifard 488-500).
It is fashionable. The “coolness” of a technology is difficult to assess, but it is a well-known fact that it can turn out to be one of the determining factors of its success (Shen and Yazdanifard 493-495). Other features of a product condition customer’s satisfaction, but it is the “coolness” that brings true popularity to it. This feature can be achieved through sound advertising; besides, the general popularity of Apple brand is definitely contributing to the overall popularity of the new product’s image.
It is secure. Since security is particularly important for a payment application, Apple Pay is provided with the necessary security features (including fingerprints activation) that will be described later. Apart from that, the small distance of NFC operation reduces the possibility of on-air-transmission snooping. Though, as it will be demonstrated later, even these precautions are not enough, for the time being the security of NFC payment is regarded as similar to that of more conventional cards (Chiejina and Soremekun 54).
It is cost-saving. Apple Pay does not save the money of a particular customer, but the costs of resources spend on the manufacturing, preservation and regulation of traditional money are significant enough to be considered a problem (Chiejina and Soremekun 54). While it is obviously too early to speak about eliminating regular paper and metal money, it is possible that the implementation of NFC payment can be a major step in this respect.
All of these factors are contributing to the spreading of NFC technologies in general and the Apple Pay application in particular. More more consumers use NFC-enabled applications and more hopes are set upon this payment medium (Pastore 107). As the technology becomes more popular, introducing relevant products becomes more profitable and promising.
Potential Risks
Apart from he opportunities presented by the technology, there are certain risks which Apple Inc. has taken by launching Apple Pay. Certain drawbacks of the technology which may endanger its development are going to be discussed in this section as well. Competition. Apple Inc., not being a pioneer of NFC technology, entered a market that had already existed. Therefore, it did not seek to avoid competition but had rather chosen to create it. The application that is often called Apple Pay’s rival is Google Wallet. Despite the fact that its performance is worse than was expected, this competition is far from over (Shen and Yazdanifard 488-500; Sang Un Chae and Hedman 32-40). Although there is no denying the fact that competition presupposes risk, it is also pushing the rivals to improve their products. The competition between two mobile payment giants may and most certainly will end in the development of the technology and infrastructure.
Acceptance. It is difficult to predict whether an innovation is going to be accepted by the consumers. Launched in 2011, Google Wallet has failed to live up to the expectations as customers seemed to be either too wary of the new technology or put off by the complexity of interface (Shen and Yazdanifard 488-500). Apart from that, the rest of the drawbacks of the technology (costs and infrastructure deficiency) have also become an obstacle for Google Wallet (Sang Un Chae and Hedman 32). On the other hand, Apple Pay appears to have become much more successful than its predecessor: by the end of 2014 (its launch date being in October of that year) customers added more than a million of cards to the service (Arthur par. 11-13). Although Google did not provide data on the number of its users at the time, the figure makes Apple Pay a most popular payment means in the US.
Security. Security of Apple Pay (along with other NFC applications) has been assessed in different ways. It is obvious that Apple Inc. has taken numerous precautions in order to protect the money of its customers (Sang Un Chae and Hedman 34). The problem is that despite the huge efforts directed at making this application as secure as possible, there has been a disturbing number of identity frauds performed through Apple Pay (Arthur par. 1-4). It is understandable that violators are searching for ways of using Apple Pay as a source of money and that any kind of payment system this popular is going to be repeatedly attacked; still, this means that the security of the application needs to be improved.
Costs. Infrastructure. While speaking about the costs of Apple Pay, we should take into account that customers need to acquire an NFC-equipped Apple device in order to use it, which presupposes extra costs. On the other hand, Apple products are quite popular and many customers already possess them. Another costly factor is the problem of infrastructure that, however, is being fixed now as prominent IT companies like Apple enter the market and change it to suit their needs (Shen and Yazdanifard 54-55). This problem will be discussed in the next section.
It appears, therefore, that Apple Inc. took the risks consciously and was ready for the problems that could arise. Apple Pay seems to be performing well despite the negative factors that have been listed. At the same time, the problems connected to the technology itself are still to be solved.
Required Infrastructure Elements
Apart from NFC-enabled phones, users need suitable payment terminals which presupposes major changes and huge costs. Even though Apple Pay has been made compatible with the previously existing infrastructure meant for contactless payment, it is not sufficient and needs to be expanded (Hern par. 4-7). At the same time, it is obvious that a company launching an NFC payment application needs to ensure its partnership with banks, supermarkets, and other kinds of service and products providers (Sang Un Chae and Hedman 37). Before entering the British market, Apple had gained the support of a number of banks, for instance, First Direct, Nationwide Building Society, and Royal Bank of Scotland (Hern par. 4-7). By building a large “net” of partners modern NFC payment providing companies may ensure their future success.
The Data Element and Organizational Aspects of the Technology
As we have pointed out, Apple Pay suggests that users integrate credit cards of a supporting bank into their applications and use their iPhones, iPads or Apple Watches either for “physical” contactless payment or for payments within the application. To authorize a payment fingerprint scanning is used, although this option can be switched off. As for Apple watch, the device does not require authentication as long as it stays on its owner’s wrist. Once it is taken off, the owner needs to authenticate it again (Hern par. 5-11). The tokenization of credit card data is used in the process of payment, which means that the actual information about it is never transferred and “token” information is used instead (Hern par. 11; Swan 70). One can conclude that Apple Inc. is paying much attention to the security of its customers’ data.
The problem of infrastructure deficiency is still acute. For example, when entering the British market, Apple made sure that its product is compatible (or rather backwards compatible) with the existing contactless payment infrastructure (Hern par. 4-7). This provided a sufficient number of compatible devices for the pioneer users but in order to expand Apple needs to further develop the infrastructure both in Britain and in the USA. Besides, there is still much room for improvement and development as Apple Inc. will surely want to enter new markets.
The Future of the Technology
Apple Pay appears to have had a good start, having been installed by more than 800,000 people in less than six months (Arthur par. 13). In July 2015, it was also introduced into the British market (Hern par. 1). The necessary infrastructure expands and the technology develops, more people get access to NFC-enabled Apple products and more companies like Starbucks and MasterCard support this new kind of payment strategy (Shen and Yazdanifard 489).
It is obvious that both the manufacturers and their partners believe that the technology has a big future. Apart from the fact that the participants are going to do their best to promote it, one should mention that NFC indeed seems to be a convenient way of payment. The benefits it offers presuppose that it has all the chances of flourishing unless a new, more convenient technology will be introduced
It seems that NFC mobile payment has found its niche as a very convenient means of conducting small value transactions as it is very often used to buy beverages, products from vending machines and to pay bus fares (Shen and Yazdanifard 493). However, it is difficult to predict if it is going to acquire a different field of application in future.
Conclusions
It appears that Apple Pay, a convenient and relatively secure contactless payment application for Apple devices based on NFC technology, is still developing. Its future depends on entering new markets and creating proper infrastructure in the existing ones. The competition in the market is obviously an important factor and it may influence the application’s success; still, Apple Inc. is a very popular brand and a giant among other technology companies which makes its survival on the market extremely likely. In this case, the competition appears to be a stimulus to progress that it will encourage Apple and its rivals to improve and perfect their products. The successful start of Apple Pay only fortifies the suspicion that this application is going to be extensively used in future along with the technology that it is based upon.
For the time being, one may say that Apple Inc. has succeeded in starting the implementation of this new technology that does not only serve to promote the brand and increase the company’s profit but also has the opportunity of encouraging changes in the currency system of countries involved.
Works Cited
Arthur, Charles. ‘Apple Pay: A New Frontier For Scammers‘. TheGuardian 2015. Web.
Bao, Yeqing, David Berkowitz, and Brent M. Wren. ‘Consumer Marketing Of High-Technology Products’. The Handbook Of Technology Management. Ed. Hossein Bidgoli. Hoboken, N.J.: John Wiley & Sons, 2010. 290-305. Print.
Chiejina, Chike C., and Olamide Ezekiel Soremekun. ‘Emerging Technology Trends That Could Transform The Way Financial Transactions Occur’. Journal of Economics and Sustainable Development 4.9 (2013): 53-60. 2015. Web.
Hern, Alex. ‘Apple Pay Comes To Britain: What You Need To Know‘. TheGuardian. 2015. Web.
Pastore, Serena. ‘E-Business And Research Institutes’. E-Business – Applications And Global Acceptance. Ed. Princely Ifinedo. Rijeka, Croatia: InTech, 2012. Print.
Sang Un Chae, Johannes, and Jonas Hedman. ‘‘Business Models For NFC Based Mobile Payments’. Journal of Business Models 3.1 (2015): 29-48. 2015. Web.
Shen, Ooi Wei, and Rashad Yazdanifard. ‘Has Mobile Payment Finally Live Up To Its Expectation In Replacing Cash And Credit?’. International Journal of Management, Accounting and Economics 2.5 (2015): 488-497. 2015. Web.
Swan, Melanie. Blockchain. Sebastopol, CA: O’Reilly Media, Inc., 2015. Print.