Apple Pay not accepted by all retailers, but will receive support from credit card issuers

September 23, 2014

Apple Pay requires NFC technology. It remains to be seen if retailers choose to install it in their new terminals. 

Some retailers and merchants are not too excited about Apple Pay because of the added investment in technology that it necessitates.

Apple Pay will be included with the newest iPhone and is backed by many banks and card issuers. According to the company, it is accepted by several large retailers, such as McDonalds and Bloomingdale’s, and is already functional in 220,000 stores across the U.S. By comparison, over 9 million retailers accept debit and credit cards. Some retailers have opted not to accept Apple Pay, such as Wal-Mart, who embrace other mobile payment technologies instead.

Apple Pay relies on NFC or near-field communication and requires that merchants have terminals with the technology that supports it. NFC has been around for years but has never really gained popularity. Some retailers currently have NFC in their terminals but have not turned it on. Up until now, NFC has represented an added cost without any benefit. Most retailers have found it unnecessary to install the technology as customers typically don’t use mobile payments. NFC costs $300 to $500 per device and fees for merchants on mobile payment systems can be higher than for plastic cards.

Credit card upgrade will give Apple a boost
Apple will benefit, however, from the fact that card issuers are urging retailers to install payment terminals for the new brand of credit cards that will soon be introduced to the market. The new cards will feature an embedded chip with added security. Cards with chips will require that new terminals be present at stores. Many retailers may choose to go ahead and install NFC during the upgrade. An added incentive for retailers to embrace NFC is that starting 2015, any card-fraud that occurs will be the liability of the party with the less-secure system. If a retailer does not have NFC and a customer’s account information is somehow stolen, with the theft being linked to the store, the retailer will have to cover the expenses.

Apple’s vision is to essentially replace the wallet. Google tried and failed to introduce its own payment system a few years ago due to lack of retailer support and limited devices that could run the technology. With the entrance of the iPhone 6 however, Apple is better positioned than ever to push their new technology to the forefront of consumer awareness. With 83 percent of credit cards supporting Apple Pay, what remains to be seen is whether retailers will install and turn on NFC terminals in their stores. Chances are they will.

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