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Apple Pay Case StudyNearly every day, it seems, a new mobile payment system is announced. The mobilepayment marketplace is experiencing an explosion of innovative ideas, plans, andannouncements, which one commentator has likened to a goat rodeo, a chaoticsituation in which powerful players with different agendas compete with one anotherfor public acceptance, and above all, huge potential revenues. It’s a battle among thetitans of online payment and retailing: PayPal, credit card companies like Visa andMasterCard, Google, Apple, startup tech companies like Square that offer mobilecredit card swiping backed by millions in venture capital, and even large retailers likeWalmart, Best Buy, and Target, all of which are developing their own mobile paymentsystems that they control. Although consumers still prefer to pay with credit cardsand cash on the go, digital mobile payment systems may finally be poised to deliveron their longawaited promise.Apple entered the fray in 2014 with its announcement of Apple Pay for iPhone 6smartphones,joiningGoogleandothersthat already had developed a mobilepaymentsystemusingNearFieldCommunication(NFC),ashortrangeradiocommunications protocol that operates within a range of a few inches, and allowsconsumers to bump, swipe, or just come close to a merchant’s NFC reader to pay forgoods and services. What’s different about Apple’s announcement of an NFCbasedpayment system is that it’s Apple—the firm that revolutionized five different industriesandintroducedthefirstsmartphones,foreverchanginghow people shop andcommunicate with one another. Apple’s iTunes store already has the credit cardinformation of 800 million users, arguably the largest such collection on earth. In2015, Apple introduced its Apple Watch, which also includes Apple Pay.Apple Pay is more than an app or a smartphone feature—it’s an ecosystem untoitself. Apple has developed relationships with many of the key players in the paymentecosystem,includingcreditgiantsVisa,MasterCard,AmericanExpress,andDiscover, as well as 11 large bank credit card issuers including JPMorgan Chase,Bank America, Citigroup, and Wells Fargo, which together account for 83% of U.S.credit card payment volume. Apple has also signed up national merchants such asWalgreens, Duane Reade, McDonald’s, Disney, Macys, Bloomingdales, Staples, andWhole Foods. Groupon and Uber have integrated Apple Pay into their systems.Unlike the introductions of other mobile payment systems, which tended to reflect theselfinterestofthosemakingtheintroduction, Apple’s approach is much moreinclusive of the major stakeholders in the marketplace. Target, Walmart, and BestBuy are missing the Apple party because they are developing their own mobilepayment systems.
Security is a central issue for all payment systems, and given the evident lack ofsecurity for Internetconnected devices and databases, payment security is a majorconcern for consumers and banks and merchants. The Apple announcement came