After a successful U.S. launch in October, Apple (AAPL) is close to debuting its smartphone-based Apply Pay service in the United Kingdom. On Monday, it was reported that Apple’s digital wallet could begin facilitating payments in the U.K. sometime in the first half of 2015.
The United Kingdom’s big banks are excited about the underlying opportunity, as Apple Pay might just make bank customers apt to make more use of their credit and debit cards.
On the flipside, it’s not like the U.K.’s banks and owners of those bank stocks don’t have concerns. Some suspect Apple Pay could end up being as much of a curse as it is a blessing to those bank stocks.
Apple Pay Is On the Way
London-based newspaper The Telegraph was the first to officially report it last Friday — the bulk of the United Kingdom’s major banks are in talks with Apple to participate as one of the middlemen for the Apple Pay feature available on the newest version of the iPhone.
Making their credit cards and debit cards available for use within the Apple Pay ecosystem is a no-brainer for banks.
Though it only launched in the United States in October and a limited number of cash registers are equipped to handle Apple Pay payments, Apple’s version of a NFC (near-field-communication) payment technology was the backbone for 1% of all card-based payments made in the U.S. in the month of November. That number trails Google Wallet’s digital payment market share of 4% for the same month, but Google Wallet has been available for three years, and can be used at more point-of-sale terminals.
In other words, Apple Pay is growing at a pace that suggests it could finally be the smartphone-based payment choice that catches on, leapfrogging Google (GOOGL) in that race. Banks would be well-advised to hitch their proverbial wagon on this rising star.
However, not every bank is keen on putting Apple in the driver’s seat of their customers’ card-based purchases.
Concerns Expressed
While the dissenter wasn’t named by The Telegraph, it was reported that at least one British bank was “uncomfortable with the amount of personal and financial information Apple wants to collect about its customers.”
The heart of the concern wasn’t hawkishness regarding their customers’ privacy. The core of the worry is that once established as a middleman, Apple could begin collecting data on their customers’ purchases and spending habits, and then begin marketing financial services that directly compete with the very banks that power the Apple Pay service.
Apple has been adamant that this isn’t its end-goal, with its support site explicitly saying, “Apple Pay doesn’t collect any transaction information that can be tied back to you. Payment transactions are between you, the merchant, and your bank.” Some of the country’s banks aren’t buying it though, worried they’ll be pushed out of the picture once Apple Pay is established as the crux of banking relationships.
It should also be noted these protests may simply be tactics designed to give some of the United Kingdom’s banks more time to deploy their own mobile payment services such as Zapp, Paym, or Barclays’ Pingit app. Even within England, though, these smartphone-based payment tools have been slow to get serious traction. As is the case in the United States, Brits may be waiting for a natively-integrated device/service like Apple Pay.
Reality Check
While shareholders of some of the U.K.’s top bank stocks may appreciate the fact that these underlying companies are looking to protect themselves — and their investors — by questioning the intent of an impending de facto partner, it’s an irrelevant concern at this point.
See, Apple Pay is coming to the U.K. whether Britain’s banks want it or not. It would be wiser for these banks to board the Apple train and at least move forward than it would be to miss the train altogether, only to become a martyr without a worthy cause.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.
