The prospects for Apple Pay in the UK

Apple recently announced Apple Pay which allows customers to pay for goods using mobile wallet and NFC capabilities

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With the launch of Apple’s iPhone 6 and iPhone 6 Plus last month came the announcement of Apple Pay – a feature that allows customers to pay for goods using the Apple mobile wallet, Apple Touch ID and NFC capabilities.

Alternative payment services, designed to offer convenience to consumers, are increasing but a recent report by Intercede found 53% of consumers would not use mobile banking services due to device security concerns.

Recently, celebrity photos were leaked online after Apple’s iCloud service was hacked and, although Apple claims iCloud security was not responsible for the breach, many consumers feel their data is at risk.

So is Apple Pay secure?

The effect of hacking claims

Apple claimed Apple Pay is safe and secure because it uses touch ID for authentication – and card details are not stored on the phone or with Apple.

David Emm, principal security researcher from Kaspersky Lab, said people’s reaction to Apple Pay would have been different if not for the iCloud hacking claims.

“I suspect we wouldn’t have had so much focus on this from a security point of view,” he said. “That suggests to me that in the longer term, security is unlikely to be a top priority for people. There’s no question that the convenience of mobile money services, being able to pay for things just by swiping your device, is increasing.”

David said similar technologies, such as Oyster Cards and contactless payment cards, are on the rise because people want convenience, and that this ease of use will lead to consumers putting convenience above data security in some cases.

Research by Sophos recently found that the security of an Apple device depends on the strength of users' passwords and how regularly they back up files.

But Emm said Apple security, despite the iCloud hacks, is better than most: “Apple generally have a good track record in terms of security, in terms of apps being sandboxed so they don’t see each other, apps being tested before they go to the app store, the overall security of the operating system. It seems Apple is approaching this with security in mind.”

Popular in the UK?

Apple Pay will be available in the US this month, and will allow customers of participating banks to pay for goods via iPhone 6 or Apple Watch. More than 220,000 merchants are on board with the initiative, and using the service on an Apple Watch will allow those with previous iPhone models to take part. Timescales for rolling out across Europe have not yet been announced.

“If you are in the US and don’t have one of the cards from those banks, you cannot use it,” said Tobias Schreyer from The PPRO Group. “That also means any European bank customers cannot use the service yet.”

Contactless payments have been on the rise since last year, and Visa Europe recently discovered contactless transactions have increased by 189% since May 2013, and more than 37.8 million contactless cards have been issued by banks in the UK alone.

Zilvinas Bareisis, senior analyst at Celent, said: “The UK is actually one of the leading markets in the world in contactless adoption. So I certainly wouldn’t say it’s behind the US or other countries in Europe.”

Despite the launch of mobile wallets in the UK, they are not yet proving as popular as contactless payments.

Bareisis said: “The first thing to know about the payments proposition is that you have to deliver something a lot better than you have today. So far, mobile payments have failed to realise that promise. There was talk about integrating coupons and loyalty points into one transaction, but that’s hard to pull off and hasn’t happened yet.”

Although contactless payments can provide speed and ease of use, NFC payments pose different challenges that make deployment and adoption more difficult – for example, banks have to hand control of information handling over to network operators.

The first thing to know about the payments proposition is that you have to deliver something a lot better than you have today. So far mobile payments have failed to really bring that promise

Zilvinas Bareisis, Celent

“It’s harder to standardise and ensure every handset works with every terminal. Even though the product’s always the same, there’s more variability in use at a technical level that you have to make sure it works,” said Bareisis.

Cash replacement

The popularity of Apple Pay could depend on its ability to serve a genuine consumer need. Alex Kwiatkowski, head of IDC Financial Insights Europe, said a lot of new payment innovations are not taking off because both merchants and consumers don’t see the need for them.

Kwiatkowski said: “Just because something is a good idea, or is technologically possible, doesn’t mean lots of people are going to want to do it.”

The difficulty for many is letting go of the service they are used to. Schreyer from The PPRO Group said banks were concerned about the Apple Pay announcement because they thought it would replace other similar services. However, only customers of participating banks can use the service, so it is more like a partnership.

Apple Pay is like most other alternative payments services – adoption will depend on consumer need.

“We must recognise that cash is never going to disappear. For one reason or another people like cash – they like notes and they like coins – and as a consequence we might have all of these different ways to pay, but cash isn’t going to disappear,” said Kwiatkowski.



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