The Advancement of Apple Pay: International Expansion

This is part 3 of a 3 part series. Part 1 can be found here and part 2 can be found here.
With the release of Apple’s iOS9 this fall, Apple’s Passbook app transforms into the Wallet. At the Worldwide Developers Conference, held in San Francisco in June, Apple announced three key updates to the Wallet experience:

  1. Support for Loyalty and Private Label Cards
  2. New Apple Pay Partners
  3. Apple Pay’s Expansion into the UKThis series examines how each of these announcements affects both Apple and the mobile payments landscape. Part 1 discussed support for loyalty and private label cards. In Part 2, we dove into Apple Pay’s new partners. Today, we’ll look at Apple Pay’s international expansion.

iPhone 6, 6 Plus, and Apple Watch owners are now able to transact via Apple Pay in thousands of UK locations, including Boots UK, BP, Costa Coffee, Dune, JD Sports, KFC UK & Ireland, Liberty, LIDL, Marks & Spencer, McDonald’s UK, Nando’s New Look, Post Office, Pret A Manger, SPAR, Starbucks, Subway, Wagamama, Waitrose, and the London Underground.
The first international implementation of Apple Pay does not come without challenges. Experts have pointed to the fact that the UK has set a ceiling of £30 per contactless transaction (the limit rose from £20 to £30 in September). Certain retailers have forged agreements that do away with the limit completely, as Apple Pay is considered to offer greater fraud protection.
Bypassing the limit might be more challenging than merchants initially thought. MasterCard says that British merchants “will need to update their terminals if they wish to accept authenticated contactless transactions at a higher value.” Meaning, the Card Verification Methods (CVMs) that most terminals look to will not be sufficient to bypass the limit; to implement the most updated CVMs, the merchant must upgrade their point of sale hardware.
Merchants that choose not to upgrade their CVM’s will face another challenge to accepting Apple Pay. To enable payment through Apple’s patented TouchID fingerprint authentication technology, the merchant will need to upgrade their POS to accept NFC payments.
Though challenges exist, Apple Pay’s move into the UK is significant for several reasons.
To begin, Apple Pay adoption in the UK should prove an easier challenge than US adoption. Yes, the same challenges exist for consumer adoption; only iPhone 6, 6 Plus, and Apple Watch users are able to transact through Apple Pay. But it should prove easier to sign UK merchants on board, as many more merchants accept contactless payments in the UK than merchants in the US, due to national timelines related to the EMV payment standard (for more on EMV, please reach out— it’s an interesting discussion).
The UK implementation of Apple Pay will bring the mobile payment system to the international market. Since the launch of Apple Pay in the US, Tim Cook and co. have publicly stated their interest in bringing Apple Pay to China. Though negotiations in China have proved complicated, penetration in the UK puts Apple Pay in a prominent position on the international mobile payments landscape.
Look for Apple Pay to continue their expansion. While talks with China will surely continue, some anticipate Apple to move into smaller markets next. Both Slovakia and the Czech Republic have been rumored as Apple Pay candidates, as both regions are currently testing a mobile payments system that would be compatible with Apple Pay, and Slovakia, in particular, is looking to become more of a conscious innovator in both mobile and smart watches.

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