Revolutionary Measures

Does Apple Pay spell the end for banks?

There aren’t many people that actively like their bank. In the wake of the credit crunch and subsequent bail-out, bankers became the focus of people’s anger, being accused of recklessness at best, and outright fraud at worst.English: ATM Bank Albilad, Riyadh Saudi Arabia...

At the same time the rise of technology has eroded the central position retail banks have in people’s lives. The majority of us do most of our banking online, with the main physical interaction happening through the screen of an ATM. We don’t know who our bank manager is – and they probably don’t have any leeway to get us a better deal on our mortgage.

So, it is unsurprising that new entrants have been looking at the sector. PayPal has grown to be the de facto way of paying for goods on eBay, and has now spread to lots of other sites. Its smartphone app now makes it easy for people to pay for goods on the high street as well. Bitcoin goes further, not just marginalising banks but the entire idea of a national currency.

However the real threat to banks is from brands coming into the market and pushing them into the background. The launch of Apple Pay in the US this week is a prime example of what might happen. By using your iPhone 6 (or Apple Watch) and Near Field Communications (NFC) you can simply pay by waving your device close to the payment reader. The built-in fingerprint sensor in the iPhone provides security (unlike traditional contactless cards), and the money is automatically debited from your bank account.

Of course, the money paying for the things you buy still comes from your traditional bank account. But in an era of low interest rates, essentially it turns the bank into a safety deposit box which stores your money, with the front-end, customer facing activity controlled and branded by Apple. That is partially down to the stringent regulations you need to meet to become a bank, and also down to where the highest margins are within the transaction.

So what can banks do to out-innovate the likes of Apple? And can they change a culture still built on retail, branch-based banking to reflect a modern, mobile-first lifestyle? Barclays has launched a service called Pingit which lets you send money to friends or family and pay bills, even if you are not a customer of the bank. Since launch in 2012 the Pingit app has been downloaded 2.5 million times and £350m has been sent through the service. But this is small change in the overall scheme of things.

Apple’s biggest competition may well come from Zapp, a service run by payments processor VocaLink that uses your existing mobile phone banking app and account for payments. Scheduled for launch in 2015 it has two big advantages over Apple and Pingit – it runs on all smartphones (unlike Apple Pay) and is seen as independent from an individual bank, although it is not yet supported by all of them.

The battle to control payments and the front end to banking promises to be fascinating. Will Apple’s brand triumph, despite (or even because of) its exclusivity or will Zapp’s wider approach succeed? How can both companies market themselves to overcome security fears and gain traction with a wider market beyond early adopters. Add to this that Google is rumoured to be buying PayPal to give it a foothold in the market, as well as other innovations yet to launch, and 2015 promises to be a busy year in the battle to replace your wallet.


October 15, 2014 Posted by | Creative, Marketing, Startup | , , , , , , , , , , , | 2 Comments

Short changing the customer?

NFCThere’s been talk about using mobile phones to pay for stuff for a long time, but until now it has been pretty much confined to Japan.

But now the technology seems to be very much coming of age. Last week Orange and Barclaycard announced the UK’s first Near Field Communication (NFC) service, where consumers simply swipe their phone over a reader to pay for low value items. And now Google is poised to announce its own NFC platform, while Apple is reportedly planning to include NFC in the iPhone 5.

The idea is a strong one – why carry around a pocketful of jangling change when you can just wave your phone and buy things? However I think adoption will be slower than predicted – while analysts Forrester predict that 40-50 million NFC equipped phones will be sold in 2011, how many will actually be used in practice? For me, coverage has to be total – if you still need to use cash in your local newsagent you’re not going to leave your wallet at home.

And moving beyond early adopters the biggest fear is going to be privacy – the data you give up on your buying habits will be invaluable to retailers (and the likes of Google). For many people these fears will outweigh the ease of use that NFC brings – remember the protests that greeted the attempted introduction of RFID chips by Tesco and Gillette?

Time for the retail and telecoms industries to be proactive, put in place a code of conduct and head off consumers’ privacy fears before they reach the front page of the Daily Mail……..

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May 25, 2011 Posted by | Uncategorized | , , , , , , , | Leave a comment