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Malauzai was out at the BAI Retail Delivery show this past week, in Chicago. We had lots of folks from the team at the booth, and had a great opportunity to meet up with partners, customers, and potential customers as well. Robb and I presented at the Innovation Showcase, showing off SmartwebApps. The demo was very well received and this time we actually avoided getting “gonged” like we did at Finovate. Actually, at BAI, it’s a shark attack tune, but you get the point.

We also had a chance to meet up with some of our favorite members of the press and analyst community, including our friend Ron Mazursky from Mercator. Ron looks after the payment space at Mercator and was very interested in what we’ve been doing around Card Management. The interview was winding down when I mentioned Apple Pay, specifically my experience with it over the week. He asked for details, and I told him to follow me, and I’d buy him a water.

Frictionless Water
We headed down to the vending machines on the second level, and there we found the large Coca-Cola machine, with a simple card swipe POS system. I had noticed several days before that these systems also displayed the NFC, or “Tap and Go” logo. Since Apple Pay works over NFC, I decided to give it a try and it worked flawlessly. So with Ron watching, I took my iPhone 6 out of my pocket, and with the screen still locked, placed my thumb on the home button, then put the phone up to the NFC logo. At that point, the screen turned on and a quick Touch ID logo appeared with text telling me that it was authenticating, then submitting. And just like that, the purchase was complete. The entire process was so fast that Ron asked me to do it again. So again I went through the same process, and again the payment went through with practically no effort and in less than 5 seconds. This time, however, Ron managed to take a photo of me paying with my phone.

This experience, which by the way I repeated several times over the week, amassing quite a large bottled water bill, got me thinking more about Apple Pay. Our position has remained the same since Robb’s white paper on the subject. Apple Pay, at present, does not appear to be a clear wallet strategy for banks and credit unions that are looking to embed the functionality in app. While embedding is provided for by the Apple Pay API for in app purchases, no such API exists at present for POS payments. There’s all kinds of potential for Apple to open up such functionality to financial institutions should they decide to do so but so far they have not. The second thing I noticed was how utterly seamless the experience was. The phone remained locked the whole time and only awoke because it both recognized the NFC reader and simultaneously recognized my thumbprint on the home button. With the Touch ID integration, Apple managed to both secure the transaction as well as put their signature “it just works” touch on POS payments. The third thing that came to mind was that merchants do not have to opt-in to allow Apple Pay payments at the POS terminals. Any terminal that supports NFC appears to be ready to accept Apple Pay payments. That’s obviously a huge win for Apple, as it removes one of several necessary barriers to entry, namely the explicit support of the merchant in the program.

Is Apple Pay the future of payments?
Frankly, it’s still unclear to me. Ben Thompson, from Stratechery has spoken extensively on the topic, and has influenced my thinking. Clearly, Apple has won the ease-of-use battle, making the Apple Pay experience considerably more seamless than Android and other offers, such as Soft Card, which we tested, by the way, alongside Apple Pay at the same vending machine. Although NFC terminals appear ready to accept Apple Pay, they are also not widely distributed and can be problematic to find. The terminal deployment is a serious barrier for Apple. What the Apple Pay future looks like is not entirely clear. What does seem clear to me is that Apple appears very serious about Apple Pay. Tim Cook referred to it on a recent earnings call alongside Apple Watch, suggesting equal footing in Apple’s mind with a brand new hardware category, like the Apple Watch. Additionally, Apple does not need to make money on Apple Pay. Apple continues to make its largest margins on hardware and if a seamless, secure, and fun-to-use payments system opens up more potential purchasers of iPhones and Apple Watches, then that’s clearly a win for Apple.

We’re obviously watching the space closely, as MCX and others enter the battle for payments dominance. Again, what the future holds is unclear but it’s going to be fun to find out!

Danny Piangerelli, Chief Technology Officer Malauzai Software danny.piangerelli@malauzai.com