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Apple Pay takes in rewards programmes

Friday 12 June 2015 | 15:10 CET | Background

Apple will roll out iOS9 in the autumn. With that update, the current Passbook app will be changed into Apple Wallet. Passbook holds coupons and tickets today, the new Wallet app will hold company-branded savings and loyalty programmes, as well as company-issued credit and debit cards. The integration of those two services is another expansion for the payments ecosystem Apple is building, making it more relevant to more users. The UK will be the first new market.

Apple will roll out iOS9 in the autumn. With that update, the current Passbook app will be changed into Apple Wallet. Passbook holds coupons and tickets today, the new Wallet app will hold company-branded savings and loyalty programmes, as well as company-issued credit and debit cards. The integration of those two services is another expansion for the payments ecosystem Apple is building.

Starting this fall with iOS 9, Passbook evolves to become Wallet, bringing Apple Pay support for rewards and store-issued credit and debit cards.Users can add participating rewards and store-issued cards to the Wallet app and seamlessly use them at checkout with Apple Pay.

MasterCard announced in June that it will enable issuers of private label cards to enroll cards into MasterCard's Digital Enablement Service (MDES) and offer tokenization services. The platform basically generates the virtual copies that go into a smartphone.  

Apple has announced that several chains will support rewards programmes in Wallet, including Walgreens, Kohl’s Coca-Cola, and Dunkin’ Donuts. Several companies will include their own credit cards. On every payment made through Apple Pay (either online or at point-of-sale) rewards points will be tallied automatically.

Over the coming months, developers will work with Apple and third party suppliers to build apps (and Watch apps) for this new set of services one at a time. For each new app, integration with cash register and back-office must be built.

In general, the NFC based transactions are set up in such a way that only card credentials are sent over NFC. The switch to tokenized data may open up the possibility to load other data into that token.

The availability of ‘Pay with Apple’ online is growing too. Many web shops will offer Apple Pay at checkout. Pinterest will launch Buyable Pins, enabling m-commerce and advertising directly linked to purchases.

Bank support growing

With support for Discover added this fall, Apple has reached agreements with every major card network. Apple Pay will accept credit and debit cards across all major card networks, issued by the most popular banks, representing 98 percent of all credit card purchase volume in the US.

While most banks and credit unions have reached an agreement with Apple, some have yet to do so. Furthermore, not every bank has made the switch from mag stripe card to EMV chip card. That limits the reach in practice to an extent.

A million locations at point of sale

Meanwhile, the number of stores that accept contactless payment at point of sale has grown form 200,000 in October to over one million. The replacement of magstripe-card terminals with EMV compatible units is in full swing, ahead of the October deadline for EMV cards in the USA.

All major manufacturers of point-of-sale equipment offer the NFC compatibility, either in new terminals or in upgradeable units. Mobile units are appearing too. Payment services provider Square has announced that it will offer a mobile card reader that accepts dual mode EMV-NFC cards. Square expects that many small shops will start accepting contactless cards and smartphone-based virtual cards.

Several major retail chains, including Walmart, have not committed to NFC, because they are developing their own payments platform, CurrentC. That service will use QR-codes to set up payment and automatically tally rewards and savings – exactly what Apple says the Wallet will do from the fall.

CurrentC however has not advanced past the stage of closed testing in one town. A commercial launch after the summer break does not seem likely, while competitor Apple is growing acceptance. The iOS9 update will change the state-of-play again. The companies behind CurrentC do support coupons and savings cards in Apple Passbook.

Many regular customers use a combination of Passbook and a traditional credit card or cash. It is not clear what will happen once Passbook is revamped as Apple Wallet and become tightly integrated with Apple Pay.

The line between rewards card and credit card is blurred anyhow, as many retail chains issue their own credit cards or hand out cash backs and gift cards in the form of stored value cards. IOS9 promises to blend those different services into one app.

It is not clear whether Pay and Wallet will still work independently. They may continue to exist separately, but combining them has obvious benefits for customers. If the two are indeed interlinked, that could mean that not supporting Apple Pay will force companies to pull their logos from Passbook/Wallet as well.

Launch to UK, not Canada

The United Kingdom has beaten Canada as the first country outside the US that will get Apple Pay. From July, over 250,000 NFC compatible terminals at point of sale will accept Apple Pay, supported by initially eight British banks, more following.

The penetration of contactless terminals at point of sale is high in the UK. Transport for London already accepts contactless payment from credit or debit cards. The iPhone 6 of Apple Watch can also be used to travel on the Tube. In addition to that, a list of retailers will offer Apple Pay online, at checkout for shoppers using an iPhone 5s or higher, or any iPad equipped with TouchID fingerprint sensor.

Apple has not announced if and when Apple Wallet services will cross the Atlantic.



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