Apple Pay: Manage Your Excitement

Though the introduction of Apple Pay was lauded as technical nirvana by some, retail veterans know the industry has been testing near-field communication (NFC) and other advanced payment methods for more than a decade. Sure, Apple will benefit from recent retailer investments in NFC-equipped payment terminals, but adoption of these terminals has been slow.

So what does this mean? The iPhone's mobile payment capabilities will change retail as we know it … eventually. Here's how I think it will do it.

1. Convenience: It all boils down to convenience. Apple Pay's combination of Touch ID and NFC capabilities not only eliminates the need for consumers to open their physical wallet and swipe a credit card, it also removes the need for payment details, user names and passwords to be manually entered at the point of sale. Retailers that have embraced advanced payment methods (e.g., early adopters of chip-and-PIN, biometrics or NFC capabilities in Android devices) have been known to accelerate the checkout process, potentially leading to higher store productivity and increased profits.

2. Customer intelligence: Apple, as it's done with Passbook and iTunes, is continuing to wedge itself between the buyer and the seller. As a pervasive intermediary, it will increasingly put pressure on financial institutions for the toll consumers pay as part of transactions. And with these toll booths on all the vital on and off ramps of the financial roadways with Apple Pay, Apple will gain access to consumer intelligence. This will allow Apple to glean significant insights regarding consumer behavior, preferences and profiles, presenting new business opportunities for the company to market hardware (think POS) and analytical services (think data bureau) to retail enterprises.

3. Retailer readiness: Now that NFC is built right into the iPhone, we can expect consumer adoption to grow. This means retailers must be prepared or risk losing sales. A big first step for retailers is to upgrade their payment terminals. It's a massive investment, especially for retailers working on razor-thin margins. However, a hardware refresh cycle already in play is working in Apple's favor; retailers are working toward an October 2015 deadline set by the payment card companies to enable chip-and-PIN payment acceptance vs. swipe and sign.

Net-Net
I question whether NFC will be the long-term de facto standard for payments, especially with emerging technologies from the likes of the Merchant Customer Exchange (MCX), which doesn't require costly and disruptive hardware investments. Apple's move, however, should motivate every retailer to train store associates in leveraging new checkout technology, effectively paving the way for future innovations to quickly take hold.

Once again, Apple is pulling an industry forward. The buzz alone will force retailers — and consumers — to take notice. I'm not willing to bet against Apple and the mouse trap it's building, but Apple Pay today is only a fraction of the potential for the future.

Rob Garf is the vice president of industry strategy and insights at Demandware, a software technology company.