The launch of Apple Pay in the UK marked an important step in Apple’s international expansion of its mobile payments platform. With support from Visa, Mastercard, American Express, several major banks, prominent retailers, restaurants, and Transport for London, Apple entered the market with much of the payments infrastructure necessary to encourage consumer adoption.
However, the absence of some major financial institutions from the initial Apple Pay UK launch was notable. Barclaycard had invested heavily in its own mobile payments offering, while HSBC was expected to join Apple Pay after the initial rollout. Beyond adoption, another important question was whether Apple could preserve the transaction-fee economics reportedly negotiated with U.S. card issuers as it expanded into the UK market.
One of the worst kept secrets in the payments industry ever, came to fruition with the launch of Apple Pay in the UK:
Credit card providers Visa, MasterCard and American Express have all registered to use Apple Pay, as have a number of banks, including Ulster Bank, Nationwide, Santander and the Royal Bank of Scotland.
Retailers and restaurants offering the service in the UK include Waitrose, M&S, Boots, McDonalds, while Transport for London is also allowing people to pay for trips in London using the service.
It is interesting to note the banks not on that list. Namely Barclaycard who recently made significant investments in its bPay mobile payments product launch and HSBC who is attributed with leaking the Apple Pay launch date, although both banks are expected to join in soon. It will be interesting to watch the adoption in the UK and compare that to the US experience. The next leak that would be interesting is to understand if Apple was able to preserve the business model they are reported have in the U.S., where Apple earns 15 basis points on transactions, paid for by the issuers.
Apple Pay in the UK provided an opportunity to see whether the mobile wallet could replicate or improve upon its early experience in the United States. Broad support from payment networks, banks, merchants, and public transportation gave consumers multiple opportunities to incorporate Apple Pay into everyday transactions from the outset.
The longer-term impact would depend on expanding issuer participation, increasing consumer usage, and establishing a sustainable business model. Comparing UK adoption with U.S. performance could also provide valuable insight into how differences in contactless payment infrastructure and consumer behavior influence the growth of mobile wallets.
Overview by Sarah Grotta, Director, Debit Advisory Service at Mercator Advisory Group
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