Apple Pay is almost here — so should small businesses take notice? After all, the new smartphone-driven payment platform is really nothing new. Contactless payment schemes have been around for years and have largely failed to catch on. But there's some reason to think that Apple Pay, which benefits both from the ubiquity of Apple's iPhone, as well as support from big banks and retailers, could really change the payment landscape.
If you've never heard of Apple Pay, here's how it works. The system functions in conjunction with Apple's two new smartphones, the iPhone 6 and iPhone 6 Plus. Those devices, which hit store shelves earlier this month, are the first iPhones to feature a near-field communication (NFC) chip that makes Apple Pay possible. Instead of swiping credit cards or fumbling with cash, it will let users hold their iPhone up to a contactless point-of-sale device at checkout for quick and easy payment. And recent rumors have indicated that Apple Pay is set to launch as soon as this Saturday, Oct. 18. So should your small business get on board? Read on for four reasons to think about adopting Apple Pay — and four reasons to pass it over for now.
Four reasons to adopt it
It could help you compete
Will Apple Pay be the platform to finally help NFC-based payment take hold in the United States? It's far too early to say, but if any company can do it, it might be Apple. After all, the company is one of the best in the world at generating buzz and interest around new technologies. It singlehandedly ushered the smartphone into the mainstream with the first iPhone, and the iPhone 6 is already breaking sales records just weeks after its release.
Banks and retailers are also on board. Apple has announced partnerships with American Express, MasterCard and Visa, as well as many national banks, and major retailers representing more than 220,000 stores have have pledged to support the platform, from Macy's to McDonald's to Walgreens. If Apple Pay catches on at major retailers, it could help NFC-based payment really take off. Adopting the platform could help your small business keep pace. [The Best Mobile Credit Card Processing Services]
Better security and privacy for your customers
Apple Pay sidesteps some of the security issues of other payment platforms. The first layer of security comes from the iPhone hardware itself, since customers will scan their finger using the built-in fingerprint reader embedded in their device. That will largely prevent thieves from using Apple Pay on stolen iPhones.
As an additional layer of security, the iPhone's NFC chip encrypts each user's payment information. That's just icing on the cake, since Apple Pay doesn't transmit your actual card data to the retail merchant when you're making a payment. Instead, it uses a security code system that transmits a new code for each transaction. That means that intercepted transaction data can't be used to make additional purchases, and takes the security onus off of businesses. You can't mishandle valuable customer data if you don't have it in the first place.
Juggling online orders with in-store transactions can be tricky for any small business. But Apple Pay might help eliminate the divide by letting customers use the same system for buying online and in person. Apple plans to roll out tools that will let small retailers incorporate the platform into the online checkout system on their website, as well as within a business's mobile app. The details for Apple Pay integration haven't yet been announced, but small business owners would be wise to watch out for more information on how to incorporate it into their e-commerce efforts.
You might already have the equipment
Giving your customers more ways to pay is just smart business, but not if accepting a new form of payment involves putting costly new infrastructure in place. But many small businesses might already be equipped to accept Apple Pay. After all, any NFC-equipped point-of-sale terminal that your business already uses can process Apple Pay transactions. And if you don't already have an NFC-enabled terminal, you might have one soon. Under federal law, by October 2015 all merchants must accept credit cards with EMV chips — a new technology that's more secure than the magnetic stripes on most cards — or face greater liability if a security breach occurs. Broader EMV adoption could give Apple Pay and similar platforms a boost, since most EMV terminals also accept NFC payments.
Four reasons to avoid it
Upgrading is expensive
Accepting Apple Pay is a no-brainer if your business is already equipped with NFC-ready terminals. But if it's not, then upgrading could be a costly gamble for small businesses. Smaller merchants have been reluctant to adopt the systems, since they can cost between $300 and $500 for each point of sale. In fact, fewer than 10 percent of merchants nationwide have NFC systems currently in place.
Training and education is needed
Implementing a new payment platform won't do much good if your employees and customers don’t understand it. Few people have ever used an NFC payment platform before, so getting your customers to try it might be an uphill battle. And while Apple fans may be aware that they can use their iPhone at Starbucks, they may not even consider using their smartphone to check out at a smaller retailer. That means that small businesses who adopt Apple Pay will have to put some effort into training and education before it pays off.
NFC hasn't caught on
Even if your NFC-equipped point-of-sale systems are in place and your employees are trained to use them, the technology may simply never catch on. It's a classic chicken-and-egg dilemma: Retailers won't adopt the systems until they're more popular, but platforms like Apple Pay will never grow in popularity if they're not supported. For now, it seems that most customers are perfectly content to swipe their credit card.
iPhone users are a minority
The iPhone may be the single most popular smartphone in the world, but on the whole, more consumers use Android-powered smartphones. And not all iPhone owners can use Apple Pay — only the new NFC-equipped iPhone 6 and iPhone 6 Plus are compatible with the platform, at least for now. When the NFC-enabled Apple Watch launches next year, owners will be able to pair it with older iPhones to use Apple Pay, but it's too early to tell if that accessory will take off. The bottom line is that the majority of your customers probably can't use Apple Pay, simply because they don’t own an iPhone. But if Apple Pay helps spur the adoption of NFC-based payment on other mobile platforms, investing in the technology now might be a smart move.
Originally published on Business News Daily.