Apple Pay. Boon for Brick & Mortar, Bane for Online Retailers?
While the supersized iPhone and Apple’s newest product took center stage a few weeks ago, the announcement of Apple Pay is arguably the biggest news as it will impact retailers everywhere – even if you only do business online.
From a broad payment industry perspective, many believe this will be the tipping point for mobile payments, despite NFC being touted years ago in smartphones with Google Wallet and other options never quite living up to the hype. The New York Times even speculates the PayPal spinoff is a direct result of Apple’s entry into the space, given eBay leadership’s previous stance. Regardless of the adoption levels or outcome, one thing is clear – Apple has already disrupted digital payments before the first transaction on its new platform.
But what does that mean for retailers without a physical presence?
At first glance, Apple Pay appears focused on disrupting in-store purchases. The iPhone transmits encrypted credit card information to point-of-sale machines using near-field communication (NFC) at participating brick-and-mortar retailers including Macy’s, CVS, Whole Foods and McDonald’s, which have already signed on to the platform.
With no physical POS system in place, online retailers won’t be impacted – right?
First, any payment system that elevates security above the breach-fest levels we see today will be an improvement. Just as the adoption of EMV/Chip-and-PIN complicates the counterfeiting of credit cards and committing fraud in card-present situations, thwarting the security of a new platform should make things harder for fraudsters at retail. With more complexity overcome at the register, fraud will inevitably shift to online retailers, who need to be ready for this surge.
Secondly, many consider Apple Pay as a first step in merging online and offline payments (See Wired’s How Apple Pay Will Destroy the Online-Offline Shopping Divide) with many iTunes accounts already tied to credit cards and the growth of in-app purchases. So if you have an app, or plan to, Apple Pay will be the default currency on iDevices sooner than later. And it doesn’t take a leap to see Apple Pay going head-to-head against PayPal and other digital payment processors in the near future.
Luckily both impacts can be minimized considerably with the right fraud solution. Even if the volume of fraudulent transactions spikes in the U.S. as it did in Europe (chart below) when EMV was adopted, a system with fraud rules customized to your business should provide the same protection whether one or a thousand similar transactions come through. And the best fraud solutions should be device and currency-agnostic, so you have the flexibility to support any payment method and currency you choose, whether it is Bitcoin, Baht, or Apple Pay.
Kount technology was designed to be futureproof when it comes to devices and currency – both of which continue to evolve and change at a rapid pace. Even if you’re in the gaming industry and have a customized currency, our fraud system provides the same level of protection as if it’s a leading credit card provider. You can learn more about these and other features of Kount by signing up for a free 15-minute fraud analysis or visiting our Kount Complete page.