Apple Pay: Good or bad for Europe's operators?

"Apple Pay is a really cool way to drain your entire bank account," commented the Guardian columnist Oliver Burkeman. That was one of the more pragmatic takes on the new iPhone 6 feature that, in Burkeman's view, seems to be trying to solve a problem that does not exist: paying for things in shops. The scary aspect, he thinks, it that Apple Pay would make it too easy to pay for things.

Apple Pay is set to be launched first in the United States when the new iPhone 6 and iPhone 6 Plus go on sale in a number of countries next week, and is also widely anticipated to be available in Europe soon.

The service essentially allows people to make contactless payments using near-field communications (NFC) technology. Some of us involved in the telecoms industry have been writing about NFC in mobile phones for years: it is indeed far from new, and one of the main discussion points has been the role that mobile operators could play. The question now being asked is: will Apple Pay be good or bad for mobile operators?

Certainly, NFC-based mobile payment services have so far failed to live up to the initial hype. Only in February this year, David Sear, the former CEO of UK mobile payments venture Weve, described the mobile payments industry as being in a bit of a mess, littered with the corpses of failed ventures.

Some see the Apple launch as a shot in the arm for NFC mobile payments in Europe. Already, banks and credit card organisations are in talks with the device manufacturer, according to analysts from IHS.

"Apple's product strategy is global-focused and as a result keeps variation in products, models and services to a minimum to maximise global scale economies. Apple has already started conversations with key financial players," IHS said.

Consumers in Europe are certainly familiar with the concept of contactless payment cards: according to the Financial Times, about 100 million contactless cards exist in Europe, representing a fifth of all payment cards. As yet, mobile phone payments have not yet made a breakthrough, and there is still some distrust among users about the safety of contactless payments in general, noted the FT report.

Mobile operators have been attempting to break down these barriers with various new propositions that promise ease of payment for services such as public transport: in the UK, for example, Vodafone is about to launch its mobile wallet service and EE already offers Cash on Tap on London buses.

Whether Apple Pay will help mobile operators drive their own mobile payment services is far from certain.

"Does it solve the operators' problems?" asked Windsor Holden from Juniper Research. "Well, it may give players such as ISIS [now rebranding to Softcard] breathing room, in the hope that the uplift in consumer awareness that will inevitably result will allow them to cling on to Apple's coat tails and gain a critical user base."

However, Holden's view is that a key beneficiary here could be host card emulation, or HCE: Apple Pay's embedded secure element (SE) leaves the MNOs--which want to make the SIM card the secure element--out of the value chain. Holden said this development would boost the confidence of those banks that have been hesitating around HCE-based deployments.

Some mobile operators have already been saying that Apple Pay is a positive development because it will help seed the market in a way that will ultimately benefit all players. A great deal is at stake for all participants in the value chain, from banks through to retailers, device manufacturers and mobile operators. It remains to be seen who will clinch the largest share.--Anne

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