Apple Pay goes live in the UK – HSBC misses launch

14 Jul 2015

Apple Pay has gone life in the UK, potentially displacing contactless cards. But without P2P payments, is Apple missing a trick?

Apple’s contactless iPhone payment system Apple Pay has arrived in the UK and will be available on day one from eight banks.

However, one bank, HSBC, which had hoped to go live on day one, has postponed its launch until the end of July, while five other banks – Bank of Scotland, Halifax, Lloyds, TSB and Marks and Spencer, will launch in the autumn.

The first wave of banks to use Apple Pay will include NatWest, Nationwide Building Society, Royal Bank of Scotland, Santander, Ulster Bank and MBNA.

The only bank that has no plans for Apple Pay is Barclays, which is still in negotiations with Apple over its share of each transaction.

Apple Pay will allow iPhone 6 and Apple Watch owners to pay for items up to £20 by simply tapping their phone or watch off the payment terminal in stores. That limit is expected to increase to £30 in September.

In effect, the technology turns Apple devices into contactless cards.

‘The UK is an important market for Apple because the level of contactless penetration in cards and accepting terminals far exceeds that of the US’

Paying amounts for goods over £20 will require users validating the payment using the extra security of fingerprint recognition.

Most of the major chains in the UK will support Apple Pay, including Boots, Waitrose, Lidl, Marks and Spencer, Post Office, Starbucks, Wagamama, KFC and Subway.

Online retailers that are ready for Apple Pay include Argos, British Airways, Domino’s, Just Eat, Miss Selfridge, Topshop and Zara. Users will be able to authenticate online payments using just their fingerprint.

Apple Pay could displace contactless payments in the UK

“The UK is an important market for Apple because the level of contactless penetration in cards and accepting terminals far exceeds that of the US,” Eden Zoller, principal analyst (consumer) at Ovum explained.

“Apple’s progress in the UK will be keenly watched across the rest of the world and particularly closely in markets like Australia, which likewise has a highly-developed contactless infrastructure.

“But displacing contactless cards in favour of NFC (near-field communication) mobile payments will be more of a challenge. NFC payments have been available in the UK for some time but have yet to gain significant traction with consumers. Apple no doubt wants to change this and Apple Pay does provide a slick user experience, while iPhone 6 sales are doing well in the UK.”

Without P2P, Apple could be missing a trick

Zoller said that the main driver for mobile payments in the UK is not NFC proximity payments but actually person-to-person (P2P) mobile money transfers.

At present, Apple Pay has no direct P2P functionality.

“This is an omission that will weaken Apple’s hand in the UK,” Zoller said.

All the major UK banks and building societies support the P2P mobile money transfer service Paym (2.5m users as of April 2015), while Barclays has a successful P2P transfer app of its own with Pingit (3.7m downloads as of February 2015).

“Barclays is also one of several UK banks that backs Zapp, a platform that enables online payments via existing mobile banking apps, and that has partnerships with leading online payment gateways such as WorldPay. Barclays Pingit will support Zapp’s ‘Pay by Bank’ functionality from October.

“Apple Pay likewise supports online payments and has partnered with major online payment gateways such as Braintree, but Apple has yet to reveal how well this functionality has been received by merchants or consumers,” Zoller said.

The UK is the latest large economy after the US to start accepting Apple Pay. There is no indication as to when Apple Pay will arrive in Ireland but it is understood that some international chains like KFC in the Republic will be able to accept payments via Apple Pay from people with UK bank accounts.

Apple Pay image via Shutterstock

John Kennedy is a journalist who served as editor of Silicon Republic for 17 years