On Jan. 22, Apple delivered a devastating blow to physical currency by announcing that Target will soon be accepting Apple Pay. Within the next few weeks, all of Target’s 1,850 locations will allow customers to make purchases with Apple Pay, as well as Samsung and Google’s mobile payment programs.
And in the next few months, Taco Bell, Jack in the Box, Speedway, and Midwestern supermarket chain Hy-Vee will join the contactless revolution by accepting Apple Pay.
Apple, which dominates the mobile wallet market with an estimated 250 million users, brought its service to a number of high-profile businesses in 2018. Last year, CVS Pharmacy, Costco and 7-Eleven began accepting it. As such, 74 of the top 100 merchants operating in the United States now let their customers pay for their goods with their smartphones.
In addition to being a smart move by one large corporation, Target’s acceptance of Apple Pay is a positive development for the entire retail sector.
Why Contactless Payments are the Future of Retail
Although only 25 percent of the U.S. population use their phones to pay for physical purchases, there is good reason to believe that this percentage will increase in the near future. For one thing, Millennials have a great affinity for mobile payments.
Almost half of the largest segment of America’s consumer demographic prefers to use mobile payments over cash. Millennials’ love of digital wallets is making mobile payments acceptance more common. In fact, smart vending machine sales are expected to reach $15 billion by 2025.
Another benefit of contactless payments that should drive the technology’s adoption is that it makes the checkout process a breeze. Programs like Apple Pay lets consumers make purchases faster than payment cards, even those equipped with EMV chips. Plus, as a study found that mobile payment users spend 23 percent more than credit card owners, retailers have major incentive to follow Target’s lead.
It’s All about Data Security
And then there’s the issue of security. Americans of all ages use their credit and debit cards to make their everyday purchases, but the recent raft of massive consumer data breaches might change that behavior. Just last month, Caribou Coffee and Marriott Hotels had to disclose that their customers’ credit card information had been exposed. Data security is an area where mobile payments beat payment cards hands down.
With Apple Pay, credit card information is not actually stored on user smartphones. Instead, it is kept on Apple’s encrypted servers while a device ID and a payment token are stored on the app, which requires fingerprint authentication to be accessed. Consequently, consumers that pay for their iced coffees and hotel rooms with smartphones are not as vulnerable to fraudsters as their card using counterparts.
That’s not to say that mobile payment systems are invulnerable to outside subversion. No system is 100 percent secure, and Apple Pay and the now defunct Google Wallet app have been hacked in the past.
But hoteliers and coffee chains do not have the technical or financial resources to develop world-class data security solutions on an ongoing basis. Google, Samsung and Apple do.
It’s hard to imagine any corporation not being interested in a new payment system, especially one that will save them from being on the hook for hundreds of millions of dollars in potential fines and settlements.