Apple Enters Payments: Is Apple Pay the Answer for Mobile Payments?

by Zilvinas Bareisis, October 9, 2014


Apple Pay has a good chance to be successful, but it’s not going to happen overnight. In the US, the keys to its success lie with the merchants, and Apple needs to develop a much stronger merchant proposition, particularly for in-store payments. Internationally, Apple may find it harder to negotiate with the issuers and will have to contend with the dominance of Android.

On September 9, 2014, Apple announced Apple Pay along with iPhone 6 and Apple Watch. Apple Pay is first available in the US, with international launch expected later. The announcement sparked a frenzy of discussions, in both private boardrooms and public forums, on what Apple Pay means for the industry.

The Celent report Apple Enters Payments: Is Apple Pay the Answer tor Mobile Payments? is our take on what Apple Pay is and how it works. The report uses Celent’s payments product evaluation framework to assess the likely success of Apple Pay and what it means for the industry.

“Apple Pay raises the bar for mobile payments in terms of consumer experience and security,” says Zilvinas Bareisis, a senior analyst with Celent’s Banking practice and author of the report. “However, given limited consumer reach and expected reluctance from the US merchants to switch on contactless acceptance in their stores, Apple Pay’s success is not guaranteed. Time will tell if Apple can ignite mobile payments and succeed where so many others failed, but this development is certainly impossible to ignore.”

This report contains 13 figures and one table. It concludes with recommendations for issuers and processors, and discusses Apple Pay’s impact on a number of important industry issues.

Celent is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally based analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis. Celent is a member of the Oliver Wyman Group, which is a wholly-owned operating unit of Marsh & McLennan Companies [NYSE: MMC].

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Table of Contents

Executive Summary




Apple Pay: What It Is and How It Works



Introducing Apple Pay



How Apple Pay Works: Getting Started



How Apple Pay Works: Transactions



How Apple Pay Works: Commercial and Other Points


Evaluating Apple Pay



Celent’s Framework for Evaluating a New Payments Solution



Consumer Perspective



Merchant Perspective



Solution Providers’ Perspective



International Perspective


Apple Pay Impact on Other Players


Summary and Recommendations


Concluding Thoughts


Leveraging Celent’s Expertise



Support for Financial Institutions



Support for Vendors


Related Celent Research


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