Apple Pay to Meet the U.K. (June 9, 2015)
Apple Pay is coming to the U.K., but it’s unclear whether Apple is adjusting its business model to entice issuer participation as it moves across the pond. The mobile payment service—which has reinvigorated the mobile wallet and NFC payment discussion in the U.S. over the past eight months—will make its long-awaited U.K. debut in July, Apple announced this week at the company’s Worldwide Developers Conference in San Francisco. Apple Pay will be accepted at 250,000 merchant locations in the country, including major retailers such as Boots, Marks & Spencer, McDonald’s UK, SUBWAY and Waitrose, along with London’s public transit system. The service will support payment cards from eight U.K. issuing banks at launch, with six more to follow, comprising a total of 70 percent of the cards in circulation in the country, said Jennifer Bailey, vice president of Apple Pay, who announced the U.K. launch during the conference keynote address. American Express, MasterCard and Visa Europe all have confirmed they will support the U.K. rollout as well.
Speculation that Apple Pay could expand to the U.K. began soon after the service debuted in the U.S. last October, but experts suggested that Apple could face difficulty expanding in markets like the U.K. where it doesn’t enjoy the dominant market share for devices and where interchange is much lower than the U.S. Interchange across the EU is set to drop even further in December, following recent regulatory reforms. Although Apple hasn’t shared publicly how much U.S. issuers are paying to have their cards used in Apple Pay, it’s been reported that Apple takes a 0.15 percent cut of the interchange fee paid by merchants for each credit card sale made via Apple Pay and half a cent for each debit card purchase. Apple Pay also may face challenges, including imminent competition from Samsung and Google, both of which have announced plans for contactless payment initiatives of their own.
Along with the U.K. launch, Apple also this week announced it will add Apple Pay support for merchant rewards programs and merchant-issued payment cards in its next iOS update. The lack of support for loyalty programs was considered by some observers to be a shortcoming of Apple Pay. But starting this fall with the release of iOS 9, users will be able to add rewards cards from retailers and brands, including Walgreens, Kohl’s, Coca-Cola, Dunkin’ Donuts and Panera Bread. Apple Pay will also support store-issued credit cards from BJ’s Wholesale Club, Kohl’s and JCPenney, with more to follow, the company said.
For a detailed look at Apple Pay’s effect on mobile payments, see the latest digital edition of Pay Magazine.