Why Apple Pay Isn't Here to Stay

Why Apple Pay Isn’t Here to Stay

With much anticipation surrounding Apple Pay’s foray into Canada, consumers, businesses and the big banks are all left wondering what impact the technology giant will have on Canada’s financial industry. In response to Apple Pay’s impending entry, Canada’s six big banks have formed a consortium to address the potential competitive threat the technology will pose.

While Apple Pay has seen positive adoption after launching in the U.S. last year, the technology essentially creates a new way to pay with credit card, allowing users to link their card to their iPhone or iWatch. But with payment serving as Apple Pay’s primary function, can it really be considered a replacement for cash?

 Several aspects of the technology suggest that while Apply Pay has helped increase consumer openness to digital wallet adoption, it may not be here to stay:

 Lack of consumer-to-consumer functionality

Many of today’s leading mobile payment technologies simply serve as a storage mechanism, allowing consumers to hold credit card information. Additionally, many purely assist with C2B transactions and do not address C2C movement of money, like splitting a bill or rent, which is becoming a more common obstacle as the use of cash declines further.

 Risk of increased consumer debt

While the ease of mobile payment technology appeals to users, with consumer debt continuing to climb, a responsible system must connect technology to real funds to avoid a further downward spiral. A mobile payment system that connects only to a users credit card increases the risk of consumer debt by creating a layer of payment invisibility, where consumers aren’t aware of how much they are actually spending. The issue is inflated amongst younger generations who are even more inclined to use their mobile phone for payment, but may be less financially literate.

 Fees

Additionally, as the digital wallet space becomes more competitive, consumers will expect a fee-less option, further mimicking the effect of real cash. While Apple Pay does not currently charge a fee to consumers or merchants, it has received recent backlash from dominant payment companies including Visa and Mastercard, who have both standardized their tokenization card security service to prevent payment service providers from charging customers, something Apple has been trying to bypass since they launched last October. This fee-sharing will likely prevent Apple Pay from becoming the dominant player in the space, creating room for more agile applications that bypass banks all together and offer low-to-no fees to their users and are filling the need for dynamic ‘social’ payments.

 In order for consumers to ditch their wallets an all-inclusive social payments that allows users to flow through debit, credit and P2P transactions without switching applications or facing high transaction fees is required.

 As one of the first to offer a true closed loop economy, nTrust is paving the way, creating a true alternative to cash and credit. Combining peer-to-peer, consumer-to-merchant, international transfer, prepaid card issuance and bills payment functionality with no fees for consumers and below-average transactional costs for merchants, we’ve created the first real replacement.

Written by

Angela Biener