Apple Pay vs. everyone else: The race to help developers bring buying to mobile

It may not be too long before cashiers greet customers with a cheerful, "cash, credit or Apple Pay?," but for app developers, there may be even more choices available.

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Apple Pay will be available in October. (Screen shot from Apple's website)

As expected, Apple launched its own foray into the mobile payment space with a service that will be built into every iPhone 6 device and leverages near field communications (NFC). As Apple product manager Eddy Cue explained onstage at the firm's launch event, Apple Pay will use technology called Secure Element to encrypt all payment information with an account number that would be associated with a credit card. One-time payment numbers and a dynamic security code would be generated for every transaction, and users can simply take a picture of their credit card with their iPhone 6 and get it verified by their bank in order to add it to their PassBook app and use Apple Pay. 

"We are not in the business of collecting your data," Cue said. "This is between you, your merchant and your bank. The cashier doesn't get to see your name, credit card number or anything else." 

Apple Pay will be launched first in the U.S., where it will likely create considerable interest among the many other players in the mobile payment space who have already been working with developers to integrate payments into apps. These include traditional credit card firms such as MasterCard and Visa, which are also Apple Pay launch partners, and pure-play online payment firms such as eBay's PayPal. Developers who want to offer payment capabilities in their apps may now be spending more of their time considering the various options and what will work best for their customers. 

"Payment providers need to make it very easy to flip the switch and turn it on," said Ali Asaria, CEO of app development firm Tulip Retail. Though based in Toronto, Tulip Retail works with large retailers across North America to create apps that help in-store associates provide an easier payment experience for customers. 

"You can assume there's always going to be a variety of ways to pay. Apple Pay only works on Apple. That's not the entire market of phones," Asaria added. "There's got to be other payment providers with Apple Pay-like payment processing that are going to happen across the board."

Rethinking payments
Asaria's firm has worked with MasterCard, for example, by participating in its N>XT challenge, a hackathon where developers can access its APIs and SDKs to create apps that rethink the possibilities of mobile payments. (The next N>XT developer challenge starts the first week of October.)

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MasterCard hopes to extend the concept of 'zero liability.' (Image source: MasterCard)

Nicholas Dinh, vice president of emerging payments at MasterCard, said the company creates programs for developers in the hopes of extending the concept of "zero liability" to consumers who want to buy things through their smartphone. That said, he suggested developers interested in exploring mobile payments should think more about the steps other than sending money from one party to another. 

"Payments itself it an important part of the value chain, however it's not the most critical part of commerce," he said. "When consumers wake up in the morning, they don't wake up and think, 'I have to make a payment.' They want to engage with retailers and merchants." 

As an example, Dinh pointed to Uber, which offers a way of getting a private car service through its mobile apps.  

"They've taken an experience that has been around for decades and reimagined that experience with connectivity," he said. "It's about being able to shed some of the friction out of that experience. Until Uber, you had to ask whether the taxi accepts credit or debit cards, then the driver has to pull over, take a credit card and process payments. In really bad traffic, that can be a negative, rushed experience."

PayPal's Here
Just a few days before Apple launched Apple Pay, PayPal released a new SDK for PayPal Here, which contains an API that lets developers create apps that connect to credit card readers, point of sale terminals in stores and other areas. 

PayPal responded to interview requests from FierceDeveloper with a prepared statement that, unlike Apple, said payment is in its corporate "DNA" and that people place great trust in its service.

Velasco-Castillo Analysys Mason


However, Enrique Velasco-Castillo, an analyst with market research firm Analysys Mason headquartered in London, said Apple's entrance into the mobile payments market will negatively impact PayPal's ambition of commanding a significant share of the market for in-store transactions.

"PayPal's Here solution is primarily geared at small merchants, enabling them to accept credit card payments, in similar fashion to competitors (like) Square in the U.S, or iZettle in Europe," he said. "Apple, however, aims to provide secure, frictionless transactions for consumers using the iPhone and--most importantly--Apple Watch wearable devices."

Velasco-Castillo said card networks such as Visa, MasterCard and American Express have partnered with Apple in hopes that wider consumer uptake of contactless payments will strengthen the position of their own payments platforms, though overall market impact will initially be relatively small because Apple Pay's contactless functionality will only be compatible with iPhone 6, iPhone 6 Plus and Apple Watch devices for customers based in the U.S.

Whatever the motive, Tulip's Asaria said it was encouraging to see more organizations working with open APIs to encourage payment apps. 

"Traditionally as a developer you'd never have talked to MasterCard. They were always behind the scenes," he said. "I think that's exciting. It's just showing how much change is going to happen."