War For Your Wallet: Apple Pay and the State of Mobile Payment Systems

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I don’t carry a wallet with me. I hate carrying cash, so on most days I have only my debit card and my ID in my pocket. All that to say I was pretty excited to be able to use Apple Pay for some of my purchases.

With Apple Pay, you just add your credit card through the Passbook app or you can load it up via the iTunes store if you are already using it to make purchases. To pay for your transaction, you just hold your iPhone up to the credit card terminal and your phone will know you are trying to make a payment. Hold (not tap or push) your thumb on the Touch ID sensor. You will get a notification confirming your purchase—and that’s it.

For some people, the notion of handing over your complete banking information will certainly feel a bit absurd with all of the hacking going on with big retailers recently. However, Apple Pay has ensured the public that it encrypts everything and only transmits a unique code assigned to you and they do not store your card numbers on their servers. The bad part is that the system has already been hacked. They sent an email to people who have signed up for their mailing list that the database containing email address had been accessed by a third party.

But the real problem is that not every retailer that has the NFC equipped terminals will take Apple Pay. As of now, about 220,000 retailers support Apple Pay with more be added soon. One of the more promising announcements came from Square founder, Jack Dorsey, who recently said that the next generation of the Square Register would be able to accept Apple Pay and BitCoin.

To make things even messier though, retailers like WalMart, CVS, and Best Buy have banded (http://www.mcx.com/) together to start their own payment system called CurrentC and say they want to make paying at the register “easier.” After reading the instructions, it is hardly any faster than swiping your card and signing for your purchase. You would need to download and open the CurrentC app on your phone and scan the QR code on the cashier’s screen. Also, before you can use CurrentC, you would need to enter your banking information (checking account and routing number).

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By developing their own payment system, they can bypass the “fee per swipe” transaction credit card companies charge these retailers that could add up to millions of dollars a year. CurrentC will deduct the money directly from your checking account. While this is great for these retailers, it’s not great news for the adoption of Apple Pay. In fact, some retailers (Rite Aid and CVS) have already stopped accepting Apple Pay and Google Wallet because those companies gets a small percentage of each transaction. They don’t want Apple Pay to take off before CurrentC is introduced to the public next year.

In the meantime, there a ton of factors that still hold back Apple Pay from being a widely used mobile payment system.

We are all stuck in something of a dilemma these days. Each of us walk around with these high-powered computers in our pockets, and yet we still have to be bothered with our fat wallets, full of all sorts of credit cards, debit cards, and gift cards. With Apple Pay enabled on all new iPhone 6 and 6 Pluses, more tech companies than ever before are trying to get your to ditch your wallet by making every day purchases easier.

But it’s not just Apple. There are a huge amount of options out there—enough to make leaving your wallet at home a real option. Here is a breakdown of five other mobile payment system alternatives to Apple Pay:

1. Google Wallet

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Google Wallet works similarly to Apple Pay but it was introduced three years ago. However, there are a number of reasons Google Wallet never really took off.

First off, instead of having your device recognize that you are at a NFC terminal like Apple Pay does, you would need to unlock your phone and in some cases, enter your pin number. Another difference is that Google stores the code that has your card information in the cloud so you would need a cell signal in order to verify and make transaction. This could be problematic if you are in a dead spot and can’t get any reception.

To use Google Wallet, Android device would need to be running 4.4 KitKat or later, which is on only about a quarter of all Android phones as of now. Furthermore, to add a card to your account, you have to add it via their website and can’t do it on your device. So while Google Wallet is a great service conceptually, in practice it isn’t convenient enough to truly be helpful.

2. Gmail

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Google now allows you to send and request money straight from your Gmail inbox. They don’t charge a fee if you are sending money from a bank account, but will charge a 2.9% fee if you are using a credit card. It works in conjunction with Google Wallet where you enter your bank account and on the “compose” email window, click the “$” icon, and then add your recipient.

Google really wants you to enter your information into Google Wallet because once you do, there is a chance you will use the platform again whereas starting from scratch if you aren’t a current user. And by adding the option to Gmail, they are letting their hundreds of millions of users the ability to send money without letting them leave the Google ecosystem.

3. Square Cash

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Square nixed their Square Wallet app earlier this year because it didn’t catch on like they hoped it would. With Square Wallet, you could pay for your items by using the bank account associated with your profile. The only problem is that it only worked with merchant’s using the Square register app.

With Square Cash, you send money simply by composing an email to the recipient, CC cash@square.com, and write the dollar amount in the subject line.

If this is your first time you are using Square Cash, you get an email asking for your debit card number. If you are the one receiving the cash, you will have to provide your checking account information to get the payment.

The good thing about this is that you don’t need to download any apps, create an account, or pay any fees. You just send an email like you normally would do. There is, however, a companion app that you can download to help you set up your account and add your debit card. If you do use the app, you can use SMS to send the money.

If you would like extra security, you can have Square Cash ask you for the three digit code on the back of your card for every payment. As of this writing, Square allows you to send up to $250 a week and you can receive up to $1,000 a week. Also, you can only link one card per email address.

When it comes to convenience, Square Cash is the ideal way to send cash from one person to another regardless of what email client you use or where you are.

4. PayPal

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Photo courtesy of Reuters.

PayPal has been around for a while and they are one of the leaders in the online payment industry and they recently a merchant system modeled after Square Wallet.

Merchants can download the PayPal Here app on their iPhone or iPad to accept payments. To make a purchase, you would need to open your PayPal app, check in to the spot, your profile will pop up on the merchant’s device, and then they can complete the transaction.

If you don’t want to use that option, you can tell the merchant to enter the phone number linked to your PayPal account and then you would have to enter your pin for the transaction to go through.

The downside is that there aren’t many merchants that offer PayPal. Home Depot, Subway, and Office Depot are currently some of their largest retailers, but you won’t see many people using it day-to-day. While many people have PayPal accounts, most people simple don’t know how to use the payment system nor do they know it is an option if they are at one of the participating retailers.

5. Plastc Card and Coin
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Plastc won’t help you ditch your credit cards, but it will help you consolidate all of them onto one single card. You can even use it at the ATM and load gift cards as well (anything with a magnetic stripe). The card has several technology built in such as NFC and RFID. It even has the new EMV chip that are starting to take off in the States that provides extra security and will be required on all registers by October 2015.

You load your cards (up to 20) onto Plastc and when you are ready to pay, you enter passcode directly on the card, swipe to choose the card you want to use, and then swipe it like you normally do. It sports an e-ink and touch display exactly like the new Kindle. The battery on the card can last up to 30 days before needing to recharge again, which you place on a charging mat.

Plastc connects via Bluetooth so if you will get a notification for every transaction. If you leave your card at the register or in your car, you phone will buzz saying it doesn’t detect Plastc anymore. Once it loses the Bluetooth connection, the card will lock up and erase all the information on the card until you connect it via Bluetooth again.

When you make a purchase, your picture and signature shows up on the card for identification purposes. It works just like a normal card but you don’t have to worry about carrying every single card with you everywhere. The app will implement facial authentication when dealing with sensitive information.

Plastic is now available for pre-order for $155 but it won’t ship until next Summer 2015. At that price, if you lose it, you would have to get another for $155 whereas if you lose your debit card, you can get a replacement for free.

Since it works off of Bluetooth, if your phone dies, you won’t be able to use your card. And if Plastc is the only card you carry, you might be out of luck if you misplace the card and won’t be able to get a replacement until you purchase another one.

Coin is similar to Plastc and was introduced before them as well. It costs the same and works much like their competitor but instead of an e-ink display, Coin’s card has a three line LCD.

From what I’ve seen so far, Plastc’s screen is far more appealing since it features a passcode security, the ability to swipe through your cards, and having a picture for identification purposes.

While Apple Pay and CurrentC wants to change the way you pay for purchases, companies like Coin and Plastc just want you to consolidate all your debit, credit, and loyalty cards onto a single one. They aren’t scared of the contactless payments taking off but are perhaps rightfully skeptical of how long it will take for mainstream adoption to actually rise.

Verdict

With all of these different types of mobile payments, it will be hard for customers to adopt a single or even multiple platforms when they can use their debit card just as easy. The debit card made checks obsolete, but it was replaced by one single card that was mostly accepted everywhere, not multiple ones. If one store took a certain type of debit card and another store its own proprietary card that only it used, people might still be using checks to pay for purchases. Having options are a good thing, but not when it creates more hassle for customers.

There is one bright, shining light in all of this however—and that’s Starbucks. While QR codes might seem like a thing of the past, it has been working for Starbucks. In fact, they currently have the most successful mobile payment platform processing about 6 million transactions (1 in 6) a week through their app. It seems that customers don’t have a problem reloading their cards via the app or at a store when their card runs out of money. One of the reasons it has worked out so well is because of their loyalty program, which rewards their customers with a free item after 12 purchases.

It’s the loyalty program that keeps customers coming back and continues to use their app instead of paying in cash or with a debit/credit card. Once you hit 12 transactions, the reward is added to your account automatically. CEO Howard Schultz announced on a conference call last week that they are working to develop their own platform. According to Schultz, 90% of all purchases used by a mobile device took place at a Starbucks store. The app is on track to process over $1.5 billion in payment volume in 2014.

NFC terminals have been around for a while now but for one reason or another, they just haven’t caught onto the mainstream. Maybe people don’t know how to use them or they just don’t want to make a change and continue to use a physical credit card. You can’t blame them though; Instead of making things easier for their customers, many are implementing systems that takes more effort than just using cash or an actual card.

Apple Pay still seems like the most likely system to attain a significant amount of mainstream adoption, but as noted above, it faces some serious problems ahead. All in all, the mobile payment industry has been around for a while now, but it still looks like it’s really just getting started. For now, don’t leave your wallet at home—you’ll still need it.

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