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Apple Pay and Zapp: 2 key entrants about to make Mobile Payments a UK reality - who will win?

So, as of June 8th 2015 , 18:45 BST, Apple (Pay) is coming to the UK. And so they should! As recently reported by Worldpay [link] the UK market is at a tipping point for contactless. This means this market is ripe for mobile payments. With, according to The Telegraph, UK consumer adoption of iPhone being over 40% of all smartphones [link], we will see in the coming months a huge groundswell of uptake in UK mobile payments. And launching next month?! With 8 banks ?! And 250,000 merchant locations ?! And you can load rewards too ?!  Boom!

And what about Zapp? As we know some of the same UK banks are also working with Zapp (100% owned by VocaLink, who in turn are 100% owned by the UK banks), a service launching to help the UK banks counter potentially disintermediating mobile payments services. With the media circus that surrounds an Apple product announcement, I’d expect Zapp to be hot on the heels of such an announcement with launch plans of their own [editorial update: it happened! link], thus capitalizing on what is, in essence, simply “payments through your mobile”.  

Apple Pay is offered directly from the iOS, vs Zapp being a part of the bank’s own wallet. Also, Zapp uses the UK’s Faster Payments network as the rails, argued by some as “the way forward”. This probably doesn’t matter to the average Joe wanting to make a mobile payment, unless of course they want to use their credit card (Zapp doesn’t support credit cards), but the question remains, will this drive additional value into the places that will support continued adoption and usage? You’d certainly expect it to be cheaper given that Zapp, an award winning payments disrupting innovation (link) actually reduces “snouts at the trough”, rather than increasing said “snouts”.

In any event, the battle ground is set (or will be soon when Zapp sets their go live date). The banks surely go with Apple Pay, but I’d also expect them to go with Zapp too. With Android Pay to follow later (and maybe Samsung Pay a little later after that), the banks are in prime spot to take part, learn and grow experience in innovating in payments; a much needed capability given the challenges and opportunities confronting the banks in 2015 and beyond. By the turn of the year the banks will have data that will let them see where consumers are putting their vote of confidence. With multiple HCE style pilots happening around the globe a bank-branded mobile wallet is certainly going to be getting tested out; the bank wallet is something that Zapp and HCE have in common. But Apple Pay is seen by a lot of people as the most elegant of the mobile solutions. So the jury is out on which will win out, and by what margin.

With all of this fast moving complexity, the challenge to the banks is clear; they need their technology to be agile, nimble, able to adapt quickly to changes in this space, and able to support the emerging standards now. We’ve all said this at one time or another, and its true again today, the banks need to be future proof. Doing this with aging systems can be a challenge, but not impossible, and solutions to this complexity do exist in the market today.


David v Goliath?

Comments: (3)

Tom Hay
Tom Hay - Icon Solutions Ltd - London 10 June, 2015, 07:531 like 1 like


Zapp was a great idea three and a half years ago, but I fear it has missed the boat. Digital products need a 'Lean Startup' approach - get something out into the marketplace and improve it quickly based on customer feedback. Instead, Zapp and their banking partners have tried to perfect the product before launch, so squandering their potential time-to-market advantage. Zapp could have been an established and trusted UK brand by now, and Apple would have had a real fight to enter the market. Now Zapp will be fighting for market share against the slickest marketing machine on the planet. Dean's technically correct that the jury's out in the case of Apple Pay v Pay by Bank, but I don't think it will take them long to reach a verdict.

Dean Wallace
Dean Wallace - ACI - Global 10 June, 2015, 09:16Be the first to give this comment the thumbs up 0 likes It's an interesting view Tom. If I were to crystal ball a bit, I'd say that assuming Zapp get the physical channel sorted quickly (say 2, max 3 quarters from now), and assuming Android Pay comes to market in a similar timeframe and is callable from within a bank's own app (like Zapp) then I think the market would then have 2 customer experiences for the 2 different phone OS (my crystal ball has a blind spot on Apples lock down on the NFC loop ;-). Customers choose phones for a variety of reasons. How they pay might sway some, but I don't see it as a deal clincher yet. I therefore think the pressure will be on Zapp to make their revenue / ROI projections with the pot of consumers that use the service, which arguably I'd expect a fair proportion to do, IF the bank's deliver their end. Commercial pressure on switching payments alone will be quite a challenge in a single market. If you compare this to Apple and Android Pay, their pockets are deep as they make MASSIVE profits from other verticals so payments to them is just another product investment opportunity. My crystal ball guess then is that Zapp will have to innovate and drive additional revenue streams. The certified identity of the consumer is quite useful at Zapp and could have a number of commercial use cases. Plus there's a whole plethora of opportunity on the horizon with PSD2 and the opening of the banking system. I wonder if that's an area of opportunity...
Paul Love
Paul Love - Konsentus - Nottingham 12 June, 2015, 10:071 like 1 like

The one thing Apple Pay has done is to bring Mobile Payments into the spotlight.

I was on record a few years ago as saying that NFC Payments was “a solution looking for a problem”, but I now believe that Apple will make Apple Pay successful.

Apple’s focus on consumer experience rather than building the technology behind NFC/HCE/TSM/etc. solutions, its huge installed base of loyal customers, plus the TFL adoption and mass roll-out of contactless terminals in the UK almost guarantee success.

Darren is right to say that Zapp has been a long time in the making, and has to now try and recapture the momentum of the early promise.

Thanks to the many Fintech innovators and the energy they have, the world of payments is a much different place to when Zapp was conceived.