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“Apple Pay can become a leading mobile payment platform that will gradually change the payment habit of Taiwanese consumers if it is able to win over consumers by providing strong data security and a very positive user experience,” said Hsieh.
According to Apple’s earning report for its 2017 fiscal first quarter (from October to December 2016), the transaction volume of Apple for the period was up 500% year on year. The report also stated that Apple Pay entered numerous new markets, including Japan, New Zealand, Russia and Spain. The rapid global expansion of Apple is mainly attributed to the popularity of iPhone devices and Apple’s continuing focus on user experience.
Many consumers are attracted to the speed and convenience of Apple Pay. As the main hardware interface for Apple Pay, iPhone represented around 15% of the global smartphone shipments in 2016. This in turn has given Apple around 20% of the global mobile payment market. Furthermore, Apple Pay offers a transaction model that fits with consumers’ desire for speed and convenience during purchasing.
To spur and profit from the adoption of mobile payment, banks and retailers need to devise business plans that will add values to using the technology. Consumers will be more willing to participate if there are ways to make mobile transactions more advantageous and convenient.
Take Japan, for example. Apple Pay has difficulty cracking into the country’s mobile payment market, so do major card issuers such as VISA and MasterCard. This is mainly because people there are familiar with the business models and standards of the established mobile payment services and electronic wallets.
In 2004, Japan’s major telecom operator NTT DOCOMO launched Mobile FeliCa that combined Sony’s contactless smartcard solution Felica with mobile chipset. Since then, many local payment services sprang up from this solution, including a popular local transportation fare card. To improve Apple Pay’s position and boost iPhone sales in Japan, the latest iPhone 7 includes support for FeliCa so that it can be used to pay for a variety of local services including public transportation.
Though mobile payment presents huge business opportunities, the complexity of the transaction process creates security issues that become growth hurdles for Apple Pay, Samsung Pay and other third-party payment providers. Various types of vulnerabilities need to be addressed before smartphones can become the main tool for mobile payment.
The security system of a mobile payment service has to be built from the ground up, starting from hardware. Furthermore, related industry participants have to make sure that each juncture that the transactions go through (e.g. the telecommunication infrastructure, end devices) are well guarded. In the case of Apple Pay, the user or the card holder confirms each transaction by pressing the Touch ID home button that acts as a fingerprint scanner.
As retailers send payment requests to issuing banks, Apple Pay use a tokenization system to protect sensitive data. The tokenization process closes vulnerability gaps that the security chips in smartphones are unable to deal with.
Hsieh stressed that localization will be an important task for providers of mobile payment services.
“Rather than copying business model from the home market, Apple Pay needs to strive to win over consumers’ trust in security and data privacy. At the same time, it needs to gain support from consumers by providing value-added user experience. Also, Apply Pay will need to collaborate with participants in different industries in building an infrastructure that allow them to develop mutually beneficial businesses involving mobile payment. By doing these things, Apple Pay will be able to take the leading role in expanding mobile payment in Taiwan.” Hsieh said.
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