What Apple Pay Really Means for Retailers

It’s official: starting October 20, Apple’s new mobile payment service Apple Pay will let consumers pay for retail purchases directly from the Apple iPhone 6 and 6 Plus. The introduction of Apple Pay has been making waves for the past month, with the buzz only gaining more traction as we get closer to the now-official launch date; for better or for worse, the service is on track to revolutionize digital and mobile commerce. Apple Pay has already lined up major retail partners for integration with the service, including names like Target, Bloomingdale’s, and Macy’s.

Meanwhile, eBay has spun off PayPal, arguably to make the latter a more nimble adversary for Apple Pay. This marks a significant shift in focus onto mobile commerce for retailers and consumers alike. There’s a lot of talk about the contactless, near field communications (NFC) technology used for in-store purchases, but Apple Pay revolutionizes in-app payments, too. And it’s about time: more online shoppers prefer to shop on mobile devices over computers. That being said, shopping cart abandonment on mobile is much higher than in traditional e-commerce, with two out of three purchases abandoned mid-process.

Apple Pay could be the critical boon that streamlines the online shopping process for more effective engagement. Let’s cut through the static. Here are four real ways Apple Pay will affect retailers:

1. Apple Pay is an instant CLV indicator. More Apple users shop on their devices than any other mobile device users – and spend more money. Apple Pay users are therefore likely to be customers with higher Customer Lifetime Value (CLV), which allows retailers to personalize messaging and incentives accordingly.

2. It optimizes mobile checkouts. Just as Amazon’s 1-Click Purchase option changed the way people shop on Amazon, Apple Pay means a seamless checkout experience for mobile shoppers. Instead of filling out annoying account or payment forms, Apple Pay users will be able to complete purchases with a single touch.

3. It eliminates credit card fees. Apple has negotiated directly with banks to receive a portion of each transaction instead of the standard transaction fees retailers usually face. Retailers can then pass those savings onto their customers to encourage more purchases – or sit back and enjoy the higher profit margins.

4. It promises security. The service doesn’t transmit a customer’s credit card information directly. Instead, it generates a one-time payment token, which is activated when the customer places her finger on the device’s Touch ID. This takes security pressure off of retailers, and allows mobile shoppers to feel more confident about making in-app or mobile purchases. While financial institutions are said to be “freaking out” about the ramifications of Apple’s move into the credit card and financial services industry, retailers should consider Apple Pay a positive development for online and mobile eCommerce. Apple Pay focuses on streamlining and simplifying the purchasing process for consumers, which in turn will help retailers improve the overall shopping experience for their customers.

That said, Apple Pay also ups the standards for retailers’ mobile commerce tactics: a smoother way to complete purchases is meaningless if your mobile shopping interface is clunky or outdated. It’s time for retailers to take Apple’s cue and focus on the customer; by creating a seamless experience from first engagement to final delivery, some of those devoted Apple fans might soon be yours, too.

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