Earlier this year, Apple announced its new iOS feature – Tap to Pay on iPhone. Of course, even at the time of the announcement, the feature was not particularly “new” or “ground-breaking” as this same concept that today is referred to as Tap to/on Phone/Mobile or Software-POS (SoftPOS for short) was already extensively experimented with for several years on Google’s Android platform.
Nonetheless, this was arguably one of the most important announcements in the Software-POS domain as Apple’s strong brand name, and marketing power brought the spotlight to the technology and legitimised the use case of accepting payments directly on smartphones not only for the seasoned payments industry veterans but also for merchants and ultimately everyday consumers.
As it’s been over half a year since the initial announcement from Apple, we thought it’d be a great exercise to look back and unpack everything that we know (and are allowed to talk about) about Tap to Pay on iPhone so far.
So, what is Tap to Pay on iPhone and what are the key features?
In a nutshell, Tap to Pay on iPhone is an iOS feature that enables apps to accept contactless payments, including credit or debit cards, and digital wallets straight on the iPhone and without any additional hardware (i.e., mPOS devices).
According to Apple, merchants using Tap to Pay will have a consistent and secure payment experience. When making a payment, the screen shown to consumers will indicate the amount being charged, the merchant’s name, the category icon, and directions on where to tap their card or device. Since Tap to Pay will be available to third-party developers – the UX consistency will be ensured through Human Interface Guidelines that will need to be followed and validated by Apple.
From the security standpoint – there’s nothing to worry about. Tap to Pay relies on the same principles as Apple Pay, where all the cardholder data is encrypted and processed using a Secure Element.
As for the features available to merchants, in addition to accepting payments, they can add a card to a customer’s file for future payments (i.e., monthly subscriptions), look up previous purchases, issue refunds, and read and issue loyalty cards. There will also be a bunch of loyalty-related features that will benefit consumers that are using Apple Wallet.
It’s important to note that Tap to Pay requires iPhone Xs or running iOS 15.5 or later. Seems reasonable as an average Apple device upgrade life-cycle is approximately 3 years, meaning most merchants with Apple devices will likely already own a compatible device.
Where are we today?
There’s still not a lot of information out there, at least in the open domain. However, here’s what we know so far. Today, Tap to Pay is available to merchants in the US via a relatively small (but growing) list of Payment Service Providers (PSP), namely Adyen, Square, and Stripe, with the likes of Chase, Fiserv, GoDaddy, North American Bancard, and Worldpay from FIS confirmed to launch their Tap to Pay services “soon”.
Without going into detail about each PSP’s offerings, it looks like it is still early days for Tap to Pay. As such, it’s not a surprise that the service is not available to every merchant. For instance, some PSPs primarily market their SDKs to third-party integrators and do not seem to focus on providing the service to merchants directly. While others provide the service to a carefully selected pool of merchants and openly refer to the service as an “early access program”.
Speaking of business and distribution models, Tap to Pay on iPhone, unlike Apple Pay, embraces collaboration between various payment industry players, enabling a mechanism for app developers to take full advantage of the technology. Apple’s Developer Portal has a dedicated Tap to Pay section with resources such as Human Interface Guidelines and Proximity Reader APIs that enable third-party app developers to leverage the new iOS feature within their payment apps. PSPs are following suit, offering APIs and Terminal SDKs to their network of partners, enabling them to “encapsulate” Tap to Pay feature inside fully-fledged mobile Point of Sale solutions.
This is excellent news for the whole ecosystem. For PSPs, this means that they will be able to integrate payment acceptance functionality on iPhones with their existing products and services so that they can compete not only on the commercial level (processing rates) but also on the technological level. This, of course, creates a certain element of pressure on smaller players that may not have strong software-development capabilities in-house. The real winners, however, are the merchants since, with time, they will have plenty of options available to them. We could imagine purpose-built super apps dedicated to specific merchant verticals and business types, e.g., an iOS super-app that combines a business bank account with Point-of-Sale features, inventory management, and integration with accounting software, with payment acceptance being an icing on the cake.
What are the next steps?
What happens next is not an easy question to answer. Learning from the experience with Apple Pay, it could take time for Tap to Pay on iPhone to become available in Europe and globally. For instance, Apple Pay was initially launched in the US in October 2014. It then became available in the UK during the summer of 2015. Some European countries had to wait until 2016, 2017, and in some cases, even 2019.
While we are not suggesting that Tap to Pay will follow the same availability schedule as Apple Pay since the card issuing domain where Apple Pay operates is vastly different from the card acceptance market, and, therefore, different factors could play a role in Tap to Pay’s rollout, a precedent has been set, and we cannot ignore it. The conclusion that we can draw from this, and knowing that Apple usually takes time to ensure the best experience for their users, is that it can take one to two years before the technology is widely available.
With that in mind, and whatever ends up being the case, with time, the solution will be rolled out internationally, new payment networks will be supported, and more and more PSPs will have the opportunity to join the Tap to Pay on iPhone club and gain new customers among small businesses and entrepreneurs that have grown to love their Apple devices.
Until then, we already have our plates full with Software-POS solutions that are available globally on the Android platform. This provides the industry with an opportunity to experiment with a similar payment use case (contactless card payment acceptance on a smartphone) and learn from hands-on experience and the best strategies for a long-term success of such solutions.