Tap to Pay: A New iOS Feature for Third-Party Providers.

Apple unveiled Tap to Pay, a new iOS feature, earlier this year for the iPhone. Naturally, even at the time of the announcement, the feature was hardly "new" or "ground-breaking" because Google's Android platform had been the subject of extensive experimentation with the same idea for several years prior, which is now known as Tap to/on Phone/Mobile or Software-POS (Short for SoftPOS).?

However, this was arguably one of the most significant announcements in the Software-POS space because of Apple's powerful brand and marketing muscle, which highlighted the technology and validated its use case for merchants and, eventually, regular consumers as well as seasoned payments industry veterans.?

What just has happened?

With the introduction of iOS 18.1, developers will be able to offer NFC contactless transactions from within their own apps on iPhone. This opens up a world of possibilities for developers and merchants, promising a more seamless and efficient payment experience for their customers.

Yes! You heard it right. Are you excited to know about this new features of iOS? Then, it's time to read this article further to know about this feature in full detail. ?

What Is Tap to Pay on iPhone, and What Are the Key Features?

Tap to Pay on the iPhone is an iOS feature that permits applications to take contactless payments directly from the iPhone without needing extra hardware (like mPOS devices), including credit or debit cards and digital wallets. It's designed to be user-friendly, making the payment process simple and straightforward for both merchants and customers. ?

Apple claims that businesses using Tap to Pay will benefit from a reliable and safe payment process. Customers will see a screen throughout the payment process that shows the amount being charged, the name of the merchant, a category symbol, and instructions on where to touch their card or device. Since Tap to Pay will be made accessible to other developers, Apple must follow and verify Human Interface Guidelines to guarantee consistency in the user experience.?

There are no security concerns. Tap to Pay operates under the same security protocols as Apple Pay, encrypting and processing all cardholder data using a Secure Element. This ensures that all transactions are secure and protected, giving users peace of mind.

In terms of the functionality offered to merchants, they may check past transactions, give refunds, read and issue loyalty cards, and add a card to a customer's file for future payments (e.g., monthly subscriptions). Additionally, there will be a slew of loyalty-related features that will help users of Apple Wallet.?

It's crucial to remember that Tap to Pay needs an iPhone XS or iOS 15.5 or later to function. This makes sense since the typical lifespan of an Apple gadget is three years, and thus, the majority of retailers who sell Apple products probably already have a compatible model.?

?Apple's decision to allow third-party wallets and payment processors in the EU access to its NFC chip is a significant shift in the industry. This move means that Apple will no longer have exclusive control over the NFC chip used in Apple Pay and Wallet. The IT giant with headquarters in Cupertino made this request in response to the European Commission's antitrust probe. This decision could potentially open up the mobile payment market, allowing for more competition and innovation.?

The commission has now published an online circular soliciting comments about Apple's pledges. Notably, to resolve the antitrust claims and avoid potentially paying a hefty punishment, Apple has promised to unlock the NFC payment technology on its iPhones. Let's examine the most recent advancements in Apple NFC payment.?

Apple's NFC Payment System and Upcoming Changes

The EU Commission accused Apple of restricting users' access to its tap-and-go mobile payment systems, which rely on NFC technology. Due to this limitation, third-party mobile wallet and payment solution providers found it challenging to provide other payment methods for users of iPhones and Apple Watches. The EU Commission's antitrust probe, which has been going on for a few years, accuses Apple of being anti-competitive with regard to Apple Pay and Wallet.

Apple has now pledged to provide outside software developers with access to its NFC chip in retaliation. These applications will allow consumers to tap-to-pay without requiring assistance from Apple Pay or Apple Wallet.?

According to Apple, apps for digital wallets, banks, and mobile payments operating in the European Economic Area (EEA) will be accessible. This will assist customers in choosing their preferred payment app.?

Notably, in 2020, the EU Commission filed an antitrust lawsuit against Apple due to its exclusive access to NFC chips in iPhones and Apple Watches.

Prior to this, Apple ensured that its iPhone range had a USB-C connector in accordance with EU regulations. The business included a USB Type-C connector while launching the iPhone 15 series globally. The EU Commission has also requested that Apple permit sideloading on iPhones. However, Apple still needs to implement it; as Tim Cook said, sideloading applications compromises security and privacy.?

What You Need to Know About Apple Opening Up NFC Chips to Third-Party Developers

A Bloomberg report states that Apple is allowing outside developers to integrate the iPhone's tap-to-pay feature. The iOS 18.1 update, scheduled for release in mid-September, will enable this capability. Furthermore, the release of the iPhone 16 also fails on this day.?

Regulators have been pressuring Apple to let developers utilize this component for a while now (especially from the European Union). The California-based corporation has been reluctant so far, citing security concerns as the reason. The true motivations, according to critics, are more financial than safety-related.?

Apple's income is at risk if Apple Pay is changed to become the default NFC payment mechanism. This is so that the phone maker may profit from every transaction made with Apple Pay.

As a result of this change, consumers will have more options when it comes to making payments with their iPhones. They can set up third-party apps as their default payment method and use Apple Pay with them. This means they can use a wider range of payment options, including reward cards, housing, hotel, transportation cards, and payment gateways, all within the Apple ecosystem.?

Approved developers will sign a business contract with Apple under the new program and pay related expenses. According to the statement, Apple plans to launch this initiative in Australia, Brazil, Canada, Japan, New Zealand, the United States, and the United Kingdom.

"Authorized developers who meet certain industry and regulatory requirements and commit to Apple's ongoing security and privacy standards can access the system," a company spokeswoman said in reference to this move.

Difficulties in Using Apple Pay for Transactions and the Justification for This Change

As previously reported, there has been a call for Apple to expand the iPhone's tap-to-pay capabilities. Apple Pay has been severely restricted to accepting credit and debit card payments from a small number of banks in certain nations and areas for a number of years.?

Moreover, Apple Pay incorporates NFC functionality. As a result, those who live in nations without Apple Pay cannot utilize NFC to make local purchases of goods and services.?

Those impacted are unable to use their local bank card to pay for services associated with iPhones, such as Apple Music. In these situations, individuals turn to outside websites that facilitate international transactions and provide virtual Dollar Cards. This is an ineffective approach that puts individuals in danger.?

People often take risks by acting as "middlemen," connecting them to banks in other nations. Since they offer more services, their prices are usually higher. As a result, anybody using their services will have to pay the payment gateway's commission in addition to standard bank fees.?

One such instance is a payment company that provides financial services to a few African nations. Every user operation, including currency conversion, adding money to the virtual card, and withdrawing money from the virtual card, is subject to a 1% fee. In addition to the various costs, they also impose a set price for receiving payments from outside.?

A user of this system can pay many charges in one transaction. For instance, sending money from your local bank account to the service provider's local account entails typical bank fees. Subsequently, there is an additional charge for exchanging your local currency for US dollars and for adding funds to your card.?

These costs are all before you are billed for using your card to make a purchase. When you consider the whole procedure, it becomes even more absurd.

What Actions Come Next?

Answering the question of what occurs subsequently is complex. In light of the Apple Pay experience, it could take some time for Tap to Pay on the iPhone to roll out across Europe and the rest of the world. For example, in October 2024, Apple Pay made its debut in the United States. In the summer of 2015, it was made accessible in the United Kingdom. It was necessary for several European nations to wait until 2016, 2017, and occasionally even 2019.

Although there are differences between the card acceptance market and the card issuing domain where Apple Pay operates, and thus different factors may influence Tap to Pay's rollout, we cannot ignore the precedent that has been set. That being said, we do not propose that Tap to Pay will follow the same availability schedule as Apple Pay. This leads us to the conclusion that it may take a year or two before the technology is generally accessible, given that Apple often takes its time to ensure the most incredible experience for its customers. ?

Conclusion

In light of this, and regardless of the outcome, over time, the solution will be made available globally, support new payment networks, and provide an increasing number of PSPs with the chance to become members of the Tap to Pay on iPhone community and attract new clients among entrepreneurs and small companies who have grown to adore Apple products.

Until then, we already have a ton of software-POS options on the Android platform that are accessible everywhere. This gives the industry a chance to test a comparable payment use case (acceptance of contactless card payments on a smartphone) and discover the best practices for the long-term success of such solutions through practical experience.