On July 14th, about nine months after its release in the United States, Apple Pay became available in a second market, the United Kingdom. At the time of launch about 70 percent of all UK-issued credit and debit cards could be used with Apple Pay, and with a higher penetration rate of NFC payment terminals in the UK, Apple Pay adoption could soon surpass that in the United States, despite the US’ head start.
Many UK consumers and businesses eagerly awaited the launch of Apple Pay, while Apple hoped to ensure a smooth launch following some minor hiccups in the US market. Issuers likely considered the identity fraud issues experienced early on as lax authentication controls led to fraudsters successfully adding compromised payment cards to their own Apple devices. Issuing banks in the UK are confirming cardholders authorized cards to be used with Apple Pay with text or phone verification, tactics more US issuers started using after being targeted with fraud.
An interesting difference between Apple Pay in the UK and US is how much issuing banks are paying Apple in fees. While Apple forms individual agreements with each issuer and these agreements are private, it is believed that Apple is charging about 15 basis points, or 15 cents per $100 transacted. In the UK, however, these fees are thought to be around 3 to 5 basis points, or a few pence per £100.
The four largest card issuers in the UK are onboard with Apple Pay and more are joining. Cards issued by Natwest, RBS, Banco Santander, American Express, First Direct and Ulster Bank could be used with Apple Pay at launch. Barclays, one of the four largest issuers, did not announce their participation until Apple Pay launched. At the time of its UK release, 70 percent of credit and debit cards issued in the UK were compatible with Apple Pay, but this will increase to 82 percent once Barclays is up and running. Several other banks have recently announced plans to support Apple Pay and will be compatible with the payment system soon, including HSBC, Lloyds Bank, Halifax and others.
Consumers in the UK who want to use Apple Pay should have plenty of opportunities to do so. With a higher adoption of contactless payments and NFC enabled payment terminals, more than 250,000 merchant locations were equipped and ready to accept Apple Pay once it went live in the United Kingdom. In addition to several major fast food, drugstore and supermarket chains, consumers will be able to use Apple Pay for public transit in London as subway, bus and rail network fares can be purchased with the NFC mobile payment service.
Soon after Apple Pay launched in the United States it was announced the UK would be the next market with Canada and China also on the radar. VP of Apple Pay Jennifer Bailey stated that Apple was “actively working on expansion plans,” but did not indicate which market Apple Pay would expand to next.
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