Unpacking Apple’s Tap to Pay on iPhone announcement

Apple issued a press release outlining Tap to Pay on iPhone. Let’s examine it and figure out what’s going on behind the scenes.

Jennifer Bailey has an expanded title: vice president of Apple Pay and Apple Wallet. 2 separate services. With iOS 15 Apple is heavily marketing Wallet app as a very separate thing, identity if you will, from Apple Pay. One reason could be that…

iOS 15.4 introduces a new framework: “Tap to Pay on iPhone will be available to participating payment platforms and their app developer partners to leverage in their software developer kits (SDKs) in an upcoming iOS software beta.” This suggests Tap to Pay is new framework, not an addition to Core NFC as direct NFC payments in apps has been strictly off limits (the ‘open NFC’ thing). Accepting payments and tying both them and iPhone NFC to POS services is new and different enough to keep things separate, especially if Apple wants to keep making payments corralled in Wallet app. We’ll find out when the SDK and documentation are released.

Stripe first, other US payment platforms to follow: “Stripe will be the first payment platform to offer Tap to Pay on iPhone to their business customers, including the Shopify Point of Sale app this spring. Additional payment platforms and apps will follow later this year.” In other words, Tap to Pay on iPhone is no ‘Square Killer’, it only removes NFC / EMV reader headaches for payment platform players so they can focus on delivering better POS software.

Apple Business Register Account: Steve Moser dug into the latest beta and found some interesting strings. They indicate that merchants who want to use Tap to Pay services will have to register an Apple Business Account, i.e. certification. Certification is important as nobody wants millions of potential rogue Tap to Pay iPhones wandering around in the wild.

Is Tap to Pay free? After you register your free Apple Business Account, talk with your payment platform provider.

Secure Element applets and NFC Certificates: Moser also found a string that sheds some light on memory constrictions in connection with Tap to Pay applets loading into the Secure Element: “Could not install Contactless Reader components due to insufficient secure memory space. Try removing some unused passes from Wallet” and “Insufficient Secure Memory”. The Secure Element holds up to 16 ‘cards’ (applets) in iOS 15 Wallet. Tap to Pay iPhones will have to clear out some Wallet items when activating Tap to Pay.

Payment platforms and their app developer partners who want to support Tap to Pay will certainly have to obtain NFC certificates to load their Tap to Pay applets in the Secure Element. Stripe says, “With Tap to Pay on iPhone, millions of businesses using Stripe can enhance their in-person commerce experience by offering their customers a fast and secure checkout.”

The key phrase is secure checkout. I suspect the Tap to Pay NFC certification process will be somewhat different from PassKit certificates that, up to now, have been for developers wanting to add payment cards, transit cards, passes, etc., to Wallet. Wallet cards are for everybody, Tap to Pay is for merchants and won’t be appearing in Wallet app, only the payment provider app. A different service with a different hurdle and a different cut of the transaction for Apple. Hence Jennifer Bailey’s expanded job title.

Some Tap to Pay thoughts
It’s very interesting that Tap to Pay and Face ID with a Mask support are coming in the same iOS 15.4 update. It’s as if Apple is saying Face ID Apple Pay is back and better than ever, at least for for iPhone 12 and later users. I think the value of Tap to Pay is not about entering the payment platform market and grabbing share, it’s about delivering a huge pool of potential quality user experience iPhone as payment terminals to POS system providers who create ‘an app for that’.

In other words if Tap to Pay delivers a fast, secure, out of the box solution that elegantly delivers a superior experience for merchant and customer, that will be enough. Tap to Pay on iPhone leads the way without being market leader. There are certainly enough crappy Android based payment terminals out there that don’t offer much competition.

The number of plastic contactless credit/debit cards users, Apple Pay users, Google Pay users, etc. is enough, or Apple thinks it’s enough to take contactless payments in the US to the next level. To date the biggest hurdle has been the lack of good contactless payment checkout hardware, the bolted on afterthought ‘you’re holding it wrong’ experience. I remember the dismal contactless checkout situation when spending a few months in Salt Lake City in 2018. If anything Tap to Pay can eliminate the bad contactless payment experience for good…if, and only if, it handles spotty network connection issues without a transaction hitch or hiccup.

It would also be cool if Tap to Pay leverages smarter NFC, and UWB, for a better customer Wallet experience. Too many times we have to fumble around to bring up the right payment or point reward card for a dumb reader that could do better. The more automatic, the better.

Will Tap to Pay play in other regions? In EMV centric markets after it clears local regulation and certification hoops, it’s certainly possible, but from a political standpoint I wonder how viable Europe is in the current ‘everything-Apple-is-monopolistic-behavior‘ environment. Japan is certainly a much more welcoming market for Tap to Pay but only if FeliCa support (Suica, iD, QUICPay, etc.) is front and center alongside EMV contactless. On of the reasons why code payments like PayPay are popular is that customers with smartphones are everywhere and merchants don’t need any upfront payment terminal investment, just a smartphone POS app. Tap to Pay iPhone could level the playing field.

Like all things Apple Pay, the changes it brings to the payments market with its tight integration of Secure Element + NFC/UWB + slick UI are not always fast or easy to see, but I think Tap to Pay has potential to bring similar changes on the merchant side which then feed changes on the customer side. An infinite loop. We’ll see how it evolves.