Apple Pay: E-Business Strategy - Case Study Example

Apple Pay - E-Business Strategy Case Studies Background Apple pay is a mobile payment service that allows buyers to make payment at retail and online shops through certain Apple mobile devices and targets to digitize credit card at the credit card terminals. Through the use of near field communication (NFC) antenna, apple touch ID and passbook; the Apple application will allow the mobile device to communicate wirelessly with point of sale systems (Apple Inc.). The service will be available to those with iPhone 6, iPhone 6 plus and Apple watch. The application will generate a code for every transaction and never reveal the account details of the customers (Turner). The banks carry the burden of transactions while Apple bears responsibility of any fraudulent use of the service. Apple negotiated for a reduced service fee even though some retailers consider the transaction fee to above the ordinary credit card charges (Jeffries). Currently, the Apple Pay services are available in US and are anticipated to spread across the globe. g) Evaluation of success or failure based on one of the IT adoption frameworks Since its launch Apple pay, payment application has been received positively by many retailers and was exhibiting a tremendous growth in the market. For example, “Mike Dudas, the cofounder of the mobile payments rewards start-up Button” claims that after three weeks of its launch the apple pay application had taken 1% of the Whole Foods transactions (Apple Inc.). He reiterated that the 1% was equivalent to 150,000 transactions of the Whole Foods. He further added that such a figure had significant implication that the application has potential to succeed because it had surpassed what other mobile payment applications had achieved within a similar period (Jeffries). A report by financial times indicated that “Apple will earn $0.15 for every $100 worth of goods” buyers purchase using Apple Pay this in the first three weeks after its launch Apple was able to make an estimated revenue of $9,000 from a single retailer only (Apple Inc.). Therefore, considering that the Apple had managed to register more than one million credit cards within the first month after it was launched and the support it has from other retailers there is high hope for the success of Apple pay application (Nathaniel). The Apple Pay application service offers simple and secure method of payment for its customers using “one touch to pay with Touch ID” (Turner). The users are not required “to open an application or wake the display” in order to complete the transaction. All they have to do is to hold the iPhone close to “contactless reader” with their finger placed on the Touch ID (Apple Inc.). Furthermore, customers will know when transaction is completed because of the subtle vibration hence they do not need to look at the screen in order to realize when the transaction is completed. Therefore, the simplicity and convenience of using the Apple Pay application is likely to attract more users resulting to expansion of the service (Jeffries). Furthermore, the use of “double click to pay and go” application makes the use of Apple pay service much simpler and can attract more users to the service. As more people adopt online transactions efficiency of services and safety of the users of online payment services becomes of the essence for the growth of payment service providers (Turner). Apple pay is quite efficient and secure (uses Secure Element that stores coded payment details). It has also connected with different existing credit card and debit card service providers thus increasing its popularity and reliability. Apple pay is more convenient than swiping credit card because the cashier does not have any access to customer’s details such as card number, name, name or any other identification details (Apple Inc.). Furthermore, making online transaction has been made much simpler because it involves the identification of credit card using Touch ID without the need for personal information for identification purpose. The success of the Apple Pay payment services will depend on the ability of the company to attract more retailers and the increase the number of clients using their services (Turner). Apple has partnered with different retailers to offer their customers with efficient and quick services. For example, Apple has partnered with Macy’s, McDonalds, Walgreens, Disney, Apple’s 258 retail stores and Sephora among others. Some of the partners such as Panera, Groupon and Uber have simplified the payment process by integrating with Apple Pay thus allowing customers to complete payment transactions without entering payment details (Turner). Apple Pay offers customers with the convenience because it offers connection with other applications thus providing customers with convenient and simple payment method (Nathaniel). It has eased the problem of market fragmentation that limited the integration of mobile payment services into a single application. Currently, Apple has more than 800 million credit cards and is expecting to sell about 80 million iPhone 6s. This will increase its capacity to expand the mobile payment services to millions of users of Apple Pay (Turner). Since there is potential for an increase in firms capable of accepting the use of a mobile payment offers greater opportunity to Apple for expanding the use of Apple Pay for payment. Some retailers such as Walmart are opposed to the use of Apple pay payments using iPhone 6 and iPhone 6 plus because they targeting the MCX is planning to start their own mobile payment application known as CurrentC that is expected to start operation by next year (2015) (Smith 1). Walmart is against the use of Apple pay, and they argue it is fighting credit card companies. Some of those opposed to Apple Pay application believes that the application if expense compared to credit card. For example, Mike Cook (Walmart’s assistant treasurer) has noted that the Apple pay payment application charges varying fees depending on the nature of transactions and that was the reason Walmart continues to push for CurrentC payment application (Smith 1). He also argued that retailers pay “card-present” fee when using in-store apple pay equivalent to the amount paid in actual credit card swipes because of low risk of fraud. However, retailers using online in-app apple pay payments are charged higher “card-not-present” fee due to increased risk of fraud in the absence of in the card (Smith 1). Therefore, MCX retailers such as Walmarts will avoid using the apple pay technology because of the differences in card fees. However, there is the probability that retailers who are currently opposed to Apple pay might start using it in the future and use it alongside CurrentC (Smith 1). The potential for Apple Pay growth is limited by security issues because customers may not trust the security system provided by Apple. The company was involved in security issues following the leakage of “hundreds of private nude selfies” most of which were taken from iPhones (Jeffries). Although Apple management blamed weak security questions and password on the leaked information, it may not be possible for the company to convince consumers about the safety of consumer information (Apple Inc.). h) Recommendations Apple Company has invested heavily on security and is alleged to be “the most secure payment scheme across the globe.” For example, they have installed Secure Elements” chip fed with “users information, credit card numbers and data” that is not shared through iCloud or Apple’s servers (Apple Inc.). When the company started its operations, some customers were charged twice for every transaction although the issue is said to have occurred by error between Bank of America and one of the payment processors. However, the Bank of America promised to correct the mistake. The company should improve the security system and assure their customers of the privacy they deserve as they use Apple Pay services (Nathaniel). The Apple Pay services are only available to limited iPhone devices including iPhone 6 and iPhone 6 plus while the services are not available to earlier iPhone devices. Therefore, the company should connect all apple devices with near-field communication (NFC) chips to earlier generations of iPhones in order to increase the number of potential users of Apple Pay services (Apple Inc.). Currently, Apple Pay services are only available in US. Therefore, the company should extend their services to the rest of the globe in order to increase revenue and expand market. In addition, the company should reduce the transaction fee for all transactions in order to make the Apple pay services competent (Turner). i) Future direction The future of the Apple Pay services depends on the effort of the company to increase the number of users and iPhone devices that can be connected to the Apple Pay services (Apple Inc.). This will enable more transactions to be completed through Apple Pay thus increasing the company’s revenue. Another opportunity to expand the business operations is by increasing the partners who can connect to the services. Through partnership with banks, retailers and credit card companies will offer the users convenient services because they can offer users with single payment services instead of using different services for various transactions (Nathaniel). Since Apple Pay services are currently available in US, only the success of the services it offers to the users will influence the adoption of that payment scheme across the globe (Apple Inc.). Therefore, due to globalization and increase in mobile service users across the globe Apple Pay has a better chance to expand its operations across the globe by expanding partnership with more retailers, financial institutions and credit card companies. Works Cited Apple Inc., “Apple Pay: Your wallet. Without the wallet.” 2014. Available at Jeffries, Adrianne, “Apple Pay allows you to pay at the counter with your iPhone 6.” (Vox Media, Inc. September 9, 2014). Nathaniel, Popper, “Banks Did It Apple’s Way in Payments by Mobile.” (The New-York Times Company, September 11, 2014). Available at Smith, Chris, “This is the real reason you won’t be able to use Apple Pay in Walmart stores.” (BGR Media, LLC, Nov 10, 2014). Available at Turner, Adam, “Apple Pay gives tap-and-go a much-needed shove.” Fairfax Media 2014 Available at Read More