The Apple Pay mobile payment system launches officially on Monday. The new payment system, unveiled at Apple’s big iPhone 6 announcement last month, will be available in 220,000 retail locations nationwide, including at many large retailers including Macy’s, Walgreen and Toys “R” Us.
For small business owners, the rollout of such a hyped “digital wallet”—which can currently only be used by iPhone 6 and iPhone 6 Plus users—may present something of a conundrum: Many small merchants have been reluctant to adopt mobile payments due to the startup cost (which is generally $300 to $500 per reader, according to RetailWire). But Apple Pay is expected to up the ante when it comes to mobile payment adoption.
Should small and independent retailers rush to jump on board? Here are some things retailers should consider when deciding whether to offer Apple Pay:
More than 20 percent of U.S. consumers could have access to Apple Pay by year end—and far more in 2015. Long-time Apple analyst Tim Bajarin predicts that about 30 million Americans will have an iPhone 6 or iPhone 6 Plus by year end, according to USA Today—meaning they will be able to use Apple Pay. Moreover, the Apple smartwatch (Apple Watch) being introduced in early 2015 is expected to include near field communication (NFC) technology and be able to facilitate mobile payments.
Small businesses with NFC readers may already be equipped to accept Apple Pay. Businesses need a payment terminal supporting NFC in order to accept and process Apple Pay transactions. That means businesses that already offer mobile payments on another system may be able to start offering Apple Pay, too. By October 2015, all retailers will need to accept credit cards with EMV chips. Many of the EMV chip readers include NFC readers—and many of those will likely be able to accept Apple Pay.
It can bolster shoppers’ data security. Given the spate of high-profile data breaches in recent months, retailers both large and small are concerned about protecting customer data. Apple Pay will encrypt each transaction with a unique code that prevents shoppers’ personal information from being stolen as it’s transmitted through a retailer’s network, according to The Wall Street Journal.
Widespread use of Apple Pay remains uncertain. Despite all the hype around Apple Pay, it’s still unclear whether it will gain significant adoption and usage by consumers. Many major retailers, including Walmart and CVS, are still not offering it, and analysts say that more than 20 percent of U.S. retailers need to offer Apple Pay in order for in order for it to achieve a critical mass. “We believe that Apple Pay will accelerate mobile payment adoption, although it will likely take some time,” Morgan Stanley analysts wrote in a report earlier this month, according to WSJ.
The bottom line: Some small businesses will want to quickly adopt NFC technology to allow Apple Pay in order to provide their customers with more payment flexibility and keep up with the big retailers already offering it. Others may want to hold off and see whether Apple Pay can convince consumers to start using it before jumping on board.
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