Analyst view: Apple Pay’s UK Debut

On the plus side, Apple Pay will launch with backing from 8 UK banks and a clutch of big name high street brands along with the Transport for London network. The UK is an important market for Apple because level of contactless penetration in cards and accepting terminals far exceeds that of the US.

Apple’s progress in the UK will be keenly watched across the rest of the world and particularly closely in markets like Australia, which likewise has a highly developed contactless infrastructure. But displacing contactless cards in favour of NFC mobile payments will be more of a challenge. NFC payments have been available in the UK for some time but have yet to gain significant traction with consumers. Apple no doubt wants to change this and Apple Pay does provide a slick user experience, while iPhone 6 sales are doing well in the UK.

However, the main driver for mobile payments in the UK is not NFC proximity payments but person to person (P2P) mobile money transfers, and at the moment at least Apple Pay has no direct P2P functionality. This is an omission that will weaken Apple’s hand in the UK. All the major UK banks and building societies support the P2P mobile money transfer service Paym (2.5m users as of April 2015), while Barclays has a successful P2P transfer app of its own with Pingit (3.7m downloads as of February 2015).

Barclays is also one of several UK banks that backs Zapp, a platform that enables online payments via existing mobile banking apps, and that has partnerships with leading online payment gateways such as WorldPay. Barclays Pingit will support Zapp’s “Pay by Bank” functionality from October. Apple Pay likewise supports online payments and has partnered with major online payment gateways such as Braintree, but Apple it has yet to reveal how well this functionality has been received by merchants or consumers.