Apple Inc’s launch of its own tap-to-pay system using near-field communication in its new iPhones and smartwatches may not be a game changer after all.<\/p>\n
The success of Apple Pay, unveiled at a gala launch on Tuesday, hinges on the willingness of retailers to use NFC-based payment systems, industry experts said.<\/p>\n
So far the technology, which uses wireless technology to transfer data over short distances, has failed to catch on due to the high costs involved.<\/p>\n
An NFC-enabled reader costs between $250 and $300. In addition to that, merchants also need to train staff and set up backend IT systems.<\/p>\n
Apple is betting on the popularity of its iPhones and the convenience and security of its payment system to prompt customers and retailers to make the shift.<\/p>\n
The technology will allow iPhone users to pay for anything from office supplies to burgers at the tap of a button, using their American Express Co, Visa Inc or Mastercard Inc bank cards.<\/p>\n
But Apple first needs to swiftly add more retailers such as Wal-Mart Stores Inc and Best Buy Co Inc, which recently stopped accepting payments using NFC terminals.<\/p>\n
“At this point we have no plans to accept Apple Pay,” Best Buy spokesman Jeff Shelman said.<\/p>\n
U.S. retailers have been notoriously slow when it comes to adopting new payment technology.<\/p>\n
They are already lagging in the adoption of payment systems that can read chip-enabled credit and debit cards, a move hastened by a massive data breach at Target Corp last Christmas.<\/p>\n
Trying to convince them to move to mobile-based payment terminals can be a big challenge.<\/p>\n
“Apple’s tremendous failure yesterday was in demonstrating anything that was merchant-friendly,” said Tom Noyes, chief executive of Commercesignal Inc, a data and payments company.<\/p>\n
“There is nothing they showed that wasn’t possible 7 years ago. There’s nothing for the merchants,” Noyes, a former Citigroup Inc executive, added.<\/p>\n
Apple declined to comment.<\/p>\n
Apple Pay also faces competition from Merchant Customer Exchange (MCX) – a consortium of retailers including Wal-Mart and Best Buy – which is developing its own mobile payment platform.<\/p>\n
MCX merchants account for over $1 trillion of consumer spending, or roughly a quarter of the total retail spending in the United States, Morgan Stanley analyst Smittipon Srethapramote wrote in a note to clients.<\/p>\n
Its members are currently prohibited from accepting all other mobile wallets. Some members have even flipped the switch on their NFC terminals.<\/p>\n
Mobile handset makers included NFC chips in about 300 million smartphones last year, a third of all smartphones shipped.<\/p>\n
The number of NFC-enabled phones is expected to touch 550 million this year, helped by Apple’s devices and an expanding number of Android gadgets, Gartner analyst Mark Hung estimated.<\/p>\n
Gartner Research had projected last year that the value of mobile payments by 2017 would be $721 million globally, with only 5 percent coming from NFC payments.<\/p>\n
“The economics of NFC implementation for the issuing and acquiring communities have been a challenge, resulting in slow adoption of the technology,” industry association Smart Card Alliance said in a report published in November 2013.<\/p>\n
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