Will Apple’s new payment solution render payment terminals obsolete?

Apple made a surprising announcement last week; that it had developed a new way of paying for goods by simply tapping two iPhones together.

The move will essentially enable an iPhone to become a point-of-sale terminal, with merchants using their phone to securely accept Apple Pay, contactless credit and debit cards. No additional hardware or payment terminal is needed.

If it takes off, could this new tech essentially render payment terminals obsolete? Potentially, but there are a few barriers to widespread adoption which are likely to affect a possible rollout onto the high street.

Payment terminals were first introduced in 1979 by payment provider Visa. They had become a stalwart of the high street by the mid ’90s, and are still being used by millions of merchants today, allowing consumers to purchase goods quickly and easily.

The terminals themselves have not changed much since their initial introduction and the space has been traditionally dominated by major manufacturers including Ingenico, VeriFone and Pax Technology.

However, in recent years a number of new companies have ventured into the space, including SumUp.  which has offered a new, refreshing take on the device. The updated version allows millions of merchants to complete quick-fire payments at checkout for a 1.69% fee per transaction.

READ MORE: Apple becomes first ever company to reach a $3tn market valuation

The standard fee percentage for leading payment firms Visa and Mastercard is around 1.29%, according to Fool.com

SumUp has also launched what it calls a “virtual terminal” which offers essentially the same service as Apple’s new Tap To Pay feature. This allows merchants to accept credit card payments remotely, using any computer or mobile device.

However, Apple’s latest announcement could mean that alternative business models – such as SumUp – could struggle, according to industry analyst Horace Dediu. Competing against the tech behemoth’s plan to offer merchants the chance to conduct business through a smartphone device that around a billion people on the planet already own, is undoubtedly a tough ask.

Arguably, this cannot be a bad thing for businesses looking to streamline their checkout solutions, but some remain unconvinced by the move.

“The news that Apple has launched its new Tap to Pay payment solution is good news for many, but not for all. Apple is of course a world-leading player and can therefore reach a huge number of customers,” Mobica global head of technology Mariusz Stolarski told Charged.

“Its solutions are instantly available, just by doing an iOS update on a vendor’s iPhone, without the need for any additional hardware. But I’m curious to know how the Android OS-based market will react to this. And how will it impact the global market of payment terminal providers?

“It’s hard to see a future for the payment terminal – particularly for lower value transactions. But ultimately the biggest test will be with consumer adoption; the technology now exists, but mass adoption and trust in the security of the system will require education and not to mention the necessity for everyone to have an iPhone!”

READ MORE: Amazon reverses decision to stop accepting Visa payments

The other issue being presented by the move is that it only concerns face-to-face transactions and so will have no impact on ecommerce.

Vyne co-founder and chief executive Karl MacGregor said: “It’s a great use case for sole traders and SMEs, but it is not a transformative initiative – all payments powered by ApplePay remain at the mercy of the card schemes and their ability to increase their already high transaction fees at any point. Therefore, businesses will still be held hostage by scheme fees and challenging practises.

“As demand for fairer, faster, and more cost-effective payments grows across the merchant community, we expect to see Big Tech embrace account-to-account payments in order to remain relevant.”

The introduction of Apple’s new software will undoubtedly speed up the payment process. However, the rate of adoption will be decided by whether businesses believe that the cost of kitting out a store with the necessary capabilities to offer the Tap and Go service is worth the conversation rate success, which has yet to be determined.

Not only this, but it would also alienate a large proportion of customers who, as indicated by Stolarski, may own an Android device. In this instance, any business looking to integrate Apple’s Tap to Pay service would have to offer it alongside the traditional (and faultless) devices that are already in place in most retail establishments, meaning they would need to incur an additional cost.

According to the tech brand’s vice president Jennifer Bailey, Apple believes that: “As more and more consumers are tapping to pay with digital wallets and credit cards, Tap to Pay on iPhone will provide businesses with a secure, private, and easy way to accept contactless payments and unlock new checkout experiences using the power, security, and convenience of iPhone.”

It appears then, that despite a number of concerns being aired throughout the industry, Apple remains confident that Tap to Pay will encourage a further reliance on its products and, ultimately, usher in a new way of paying.

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