July 27, 2015

Apple Pay and the Revolution in Online Payments


“You hear that Mr Anderson – that is the sound of inevitability…”

The rise of m-commerce is changing the way online payment platforms function. Hugo Grimston from Paddle.com shares his thoughts on the revolution.


The most important announcement to come out of Cupertino last September was not the Apple Watch (although that may turn into a pretty neat device in a couple of generations time), nor the beautiful Macbook with a single USB-C port – it was the announcement of Apple Pay.


Yes, you may say, it is pretty awesome to be able to pay for my latte, quarter pounder and tube ticket using my phone. However, that is not the killer feature of Apple Pay, given that paying for physical goods using a credit card or cash is not that difficult (and we will not be able to dispense with them altogether for a long time). Where Apple Pay and its ilk will be transformative is in the field of e-commerce. Like everything else in the tech world, e-commerce has been revolutionised by the smartphone. IMRG Capgemini research shows that more than 40% of e-commerce sales now come from mobile devices.


E-commerce on mobile devices is radically different from that on desktop due to small screens and fiddly keyboards (that is assuming that Blackberry ain’t making a comeback). Even if a vendor nails their mobile site – in order to take a payment by credit card a consumer needs to enter over 50 characters (name, address, credit card number, dates, CCV etc.) flipping between numbers and letters. It’s a complete nightmare, and accounts for the following startling statistic: checkout abandonment in traditional e-commerce is about 68% (not great), however for mobile e-commerce this increases to – wait for it – a whopping 97% (according to this article). That is friction and some – if the mobile abandonment rate reduced by 10% to a still quite ugly 87% then the vendor’s sales will increase over 4x. If friction were the same on mobile as desktop (68%), then mobile sales would increase 10x… Holy smoke!


That is where Apple and Android Pay come in. Secure fingerprint scanning allows 1 click checkout. Bang! This has the potential to be hugely disruptive to 2 giants of e-commerce 1.0 – Amazon and PayPal. Using Apple and Android Pay, normal vendors will be able to compete with Amazon’s 1-Click and who would use PayPal to pay for stuff online anymore unless they are using the digital wallet?


Amazon will be fine, because it’s Amazon and is constantly innovating.  I’m more concerned about PayPal though – it was the darling of e-commerce, but has atrophied under the ownership of eBay. Given the official split last week, Paypal could once again become a champion for small businesses, or just as easily be a casualty of m-commerce. Hard to imagine now given that it is a $50 billion behemoth and will be insulated by its acquisitions such as Braintree and Xoom, however if they’re not worried now they ought to be.


All this clearly won’t happen overnight. There are some barriers to overcome – Apple and Android Pay do not yet work in a browser (only in app for time being) and not everyone has a smartphone with a biometric scanner. However, I think I can hear the sound of inevitability.


Hugo Grimston is the Finance Director of Paddle.com, a London-based startup providing the tools for digital businesses to sell and grow.

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