Apple Pay is being billed as a potentially industry changing initiative. 1 Nevertheless, in order for Apple Pay to become ubiquitous it must overcome challenges in two key areas. 2

Payment systems are based off of a two-sided relationship. On one side you have the person sending the payment and on the other side you have the person receiving the payment. So, the first challenge is to convince people to keep an item with them capable of sending the payment and the second challenge is convincing people to get an item capable of receiving the payment.

The first challenge is the easy one for Apple to overcome. People buy iPhones like hotcakes. Apple sold 10 million iPhone 6/6+ handsets during the opening weekend alone. Apple doesn’t have to convince you to carry a new Apple Pay dongle because it’s built into a device you already carry. The real challenge comes in having devices capable of receiving the payments in key locations. I separate those that receive payments into three main groups: virtual stores, large physical stores, and small physical stores.

Apple Pay attacks virtual stores indirectly by integrating with apps. I suspect that this will be sufficient in the beginning but look for Apple to eventually integrate Apple Pay directly into Safari to make using Apple Pay on the web a great experience.

Apple Pay must reach widespread adoption with large physical stores.3 I suspect this will not be too difficult for them to accomplish. Apple Pay works with industry standard contactless payment systems already seeing adoption across the world. One of Apple’s institutional strengths is negotiating contracts with large and powerful industries. Apple already has big retailers like Nike, Staples, Bloomingdales, and many more on board with the plan.4 And, oh by the way, in addition to getting major retailers on board Apple has partnered with major financial institutions.

I’m not trying to let Apple off the hook, but it looks to me like they will have reasonable, if not great, success with virtual stores and shopping at major retail chain type stores. However, Apple will not be able to make Apple Pay ubiquitous until they can infiltrate small physical stores. And to be clear, I am including individual people in this group. Many people have tried to revolutionize mobile payments that are made to small stores or individuals. Square immediately comes to mind. My wife uses Square to manage payments for her business. Overall the system works well and is user friendly, but it still has flaws. In order to swipe a card to have to have your dongle. And, guess what… people hate dongles!!! You could type the card number in, but as the person paying you run into the same security risks that confront the entire credit card industry.

What if Apple made an easy way to pay your friends back for lunch? What if Apple made an easy way to pay at smaller stores? What if the system was as easy as cash?

As I mentioned above, the challenge answering these questions exists because not everyone has an Apple Pay terminal with them all the time. But what if we did? What if the iPhone had the ability to send and receive Apple Pay payments? That would mean Apple did not just sell 10 million devices capable of sending a payment but 10 million devices capable of receiving a payment. That would be a stealthy way to make Apple Pay ubiquitous.

I do not know if the NFC implementation on the iPhone would even allow for it to send and receive payments. If it can’t receive payments right now then Apple is missing out on a huge opportunity to become the largest player mobile payments. If the iPhone can receive payments then the mobile payments market is Apple’s for the taking.

What if iPhones were Apple Pay Terminals Too?

  1. I say “potentially” because, as with most things Apple, pundits can be very polarized about what Apple is doing.

  2. Although I will approach this from the viewpoint of Apple, the concepts I identify apply to all industry players.

  3. I use the term “large” loosely here. We could substitute in “chain” or “corporate” physical stores.

  4. I love you Publix but I am still pretty annoyed you have so far chosen to opt out of Apple Pay.

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