"Apple Accept" Card Payments through iPhones - The Good, The Bad & The Reality!

In the last 24 hours, social media and blogs have been set ablaze with comments on Apple's foray into the payment space with it's new "SoftPOS" payment terminal solution. While speculation is rife and comments from the company non existent, here is my view as an industry insider and Product Manager working in that space. What this might mean for the Payments Industry? What are the big issues that still need to be solved? What approach Apple will likely take?

Following it's acquisition of Mobeewave in 2020, those in the know have been tentatively waiting for the expected news that Apple would launch the ability to turn iPhones into payment terminals for some time.

From a strategy point of view it makes perfect sense for Apple, they want to sell more devices and lock more people into their ecosystem. There is no doubt that this new product will drive Apple adoption, particularly where there is a strong need for easy access payment solutions in large markets with infrastructure issues such as India or Africa.

For consumers, this will seem like a new innovation, a game changer, but in reality "SoftPOS" has been quietly developed on Android since 2016 and there are already 30+ SoftPOS companies globally that will be watching with interest on whether Apple will open this functionality up to them allowing them to deploy their solutions on the iPhone, but I think they may be in for a disappointment - at least in the short term.

The Good

The good news is that in true Applesque style, it will make things simple and ultimately make payments more accessible to micro merchants. It will also be a catalyst to mainstream adoption acceptance of "Tap and PIN" as opposed to "Chip and PIN", which can only be a good thing and another step towards the demise of traditional payment terminals.

They will also solve the inter app compatibility issue by allowing a button integration like they did with Apple Pay on ecommerce to apps like Point-of-Sale.

The Bad

Of course the likely approach is that Apple will release with a partner and will take a similar approach to Apple Pay, they will allow acquirers and possibly payment providers to integrate to them in return for a fixed basis point charge - say 0.15%, just like they did with issuers when they launched Apple Pay back in the day.

This is not in reality good for the user as that convenience comes at a cost and it will probably still be cheaper to go and source a separate solution from an existing payment provider.

The Reality

There are though some major problems and barriers to Apple's go to market success globally on "Apple Accept". The payments industry being incredibly complex and legacy from both a technological point of view and from a legal/regulatory perspective is one.

We must also remind ourselves that Android still controls about 80%+ of the smartphone market, so this is unlikely to impact too heavily on that, as there are already decent alternatives being offered on that platform through acquirers that also can provide a wealth of other services Apple cannot yet provide/have no desire to be involved with.

So, there are still some big issues they need to solve either themselves or with bank partners before it can really succeed and deliver a revolutionary experience.

1. Offline PIN - Many cards in circulation, including in the UK use offline pin and right now, there is no solution to this issue. It needs issuers to stop issuing offline chips, acquirers to redirect support to online PIN in those markets and for card networks to allow alternative solutions such as the use of 3DS rules in a card present environment
2. PCI Compliance - The PCI council are yet to release their new standard "MPoC" and this will change things, while Apple are likely working with the council in the working groups, let us not forget that as yet no SoftPOS solution is officially PCI compliant as there is no official standard yet for COTS (Consumer off the shelf) devices and PIN on Mobile.
3. User Experience - The majority of solutions in market today on android use either randomised PIN entry screens or ones that move to prevent skimming and hacking. There are a couple of patented fintech solutions out there, but I cannot see Apple working with them, so it will be interesting to see how they solve this pain point but I think this should be an easy one given the closed ecosystem.
4. Accessibility - This is key, there are laws in place around accessibility and to my knowledge not a single provider has managed to effectively solve this yet, although Apple may take the view that their vast network of accessory providers may fill this void
5. Trust - How will Apple solve this, many do not already trust them with data today. Plus how will a consumer feel about paying on an iPhone, I mean, how do you know the guy selling you a coffee on a market stall is actually using the app and not skimming your card data?
6. Onboarding - This is a big challenge, and while Apple may let the partner solve this, and while 85% may be able to do automated onboarding, KYC/AML requirements are a big deal and not easy to overcome and create a massive friction point. Even bigger players in this space that are far down the road, still struggle with global solutions as in some markets you still have to send a guy down to the records office to stand in a queue and get the documents to check.

So will Apple win out and kill off some of the middle men? Or will they just find a sweet spot in an already fragmented ecosystem, missing the opportunity to actually drive any real innovation?

Only time will tell of course, but I suspect it will be the latter!

And finally, let's not forget the existing fragmented settlement system that Apple could easily solve by adding a wallet in future and settling direct to their already integrated issuer accounts via apple pay!

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This article is written as an opinion piece by James Durrant and does not reflect the opinions of any company or person to which I am affiliated.

Credit to @MartinHerlinghaus for coining "Apple Accept" :)

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