Posted by: Dennis Wafula September 20, 2014
The digital currency market is experiencing huge growth with companies devising creative and innovative solutions more so in the mobile payments space. Financial transfers and payment systems have experienced huge strides in technological advancement in the last few decades. There has been a rapid graduation from debit card and ATMs to online transactions that has been followed in hot pursuit by mobile transactions, like PayPal.
A recent entrant is Apple Pay, which is a new mobile payment system unveiled by Apple this year. Compared to existing solutions such as current credit card system, it is billed as secure for it has features such as biometric authentication and GPS location.
The emergence of Apple Pay as a large scale mobile payments solution is causing tremors in the digital currency market. It is set to rival Bitcoin which is a peer to peer decentralized payment network with no central authority or middlemen.
The entrance of Apple Pay is not only impacting on how Bitcoin features in the market but it is set to affect traditional players in the credit card world namely; consumers, merchants and card issuers such as Visa, MasterCard and AmEx. Thus to card issuers, wary of fraud risk, Apple Pay is offering a security assurance and in exchange, reaping from discounted interchange rate from major card issuers such as AmEx.
What the Bitcoin Community Says
Views about the scenario that is likely to emerge are varied. Some members of the Bitcoin community note that it is too early to pinpoint the effect Apple Pay will have on Bitcoin. Still to others, the entrance of Apple in the mobile payment space is a blessing for it will enable storing of money on phones instead of credit cards.
Indeed according to David Ripley, co-founder and CEO of Bitcoin wallet Gildera, although Apple Pay may have less influence on Bitcoin users, it will instead offer non-technologically savvy people ability to undertake virtual financial transactions to pay with Bitcoin in a physical transaction, for phone usage will be required; an aspect that was an obstacle previously.
Brian Kelly in his commentary on CNBC ON (10 Sep 2014), argues that the Bitcoin blockchain feature which does not transmit personal data makes Bitcoin superior to discerning consumers compared to Apple Pay.
Likewise Bitcoin core developer Oleg Andreev notes on Twitter that Bitcoins scores highly on privacy and thus attractive to many “… (Only) the merchant and your bank know who you are…there is no bank and the merchant only sees money, not your personal data,” he says. Commenting on Twitter, Andreas Antonopoulos, Bitcoin entrepreneur says Apple Pay will attract more users but in the long run Bitcoin will be the option for many.
Getting Apple Pay
The key features of Apple Pay is that users should be 18 years and living in USA. They should open a new account and posses two forms of identity Cards, and make a physical appearance to their banks. Those applying for the service have to wait for duration of three to five days to obtain a debit card and PIN number to. One may have to pay $2-$5 monthly in certain instances or purchase an iPhone. Personal information for processing of an Apple ID as well as install easy to use software on the iPhone is equally required.
According to John Markan, a contributor for the Forbes magazine (12th September 2014), Apples Pay’s advantage is that big credit card networks will not have to pay costs for working with Apple. Its emergence could at the same time push down fraud costs, which could consequently lower credit card fees.
Markman while quoting The New York Times publication opines that the partnership with the industry is much more attractive than an initiative being led by some of the biggest retailers, known as the Merchant Customer Exchange, keen in replacing the card networks. Moreover, credit information will not be housed on the devices, so if they are lost there is no risk to the consumer.
The disadvantages of Apple Pay are that retailers have to buy and install special hardware to read the wireless signal from Apple devices. This means that in Europe and Canada where the special hardware systems are developed will have an advantage over other countries in accessing the service.
Worth to note is that the service will serve as a ‘trap’ whereby Apple, will extract a fee for purchases made by Apple Pay and use the system to market own merchandise such as iPhones hence tying its customers into the Apple system. Once hooked to an iPhone it will be difficult for one to revert to an Android device.
Apple Pay, observe actors in the digital currency market, is confined to the USA American market as a result is unable to enjoy access markets elsewhere in the world. For example it is locked out of Asia and Africa where the digital currency market is experiencing exponential growth and faster diversification based on home grown solutions such as mobile phone money transfer in East Africa pioneered by Kenya’s mobile phone companies..
Apple Pay’s reliance on the iPhone could contribute to it losing clients who are loyal to Bitcoin. Many may opt to go for smart phones and tablets running Android, a leading mobile-operating system.
Bitcoin has got various advantages compared to other digital payment systems such as Apple Pay. It can be accessed by people in all corners of the world so long as they have an android device and a gmail address connected to the Google Play Store and Bitcoin client with a password.
The second advantage is the Payment freedom. This is exhibited by the fact that one can send and receive any amount of money instantly anywhere in the world without hindrances such as bank opening hours, national borders and amount limits.
It also charges low fees with payments attracting small fees or none. Users may include fees with transactions to receive priority processing, which results in faster confirmation of transactions by the network. Funds can also be deposited directly into recipient’s bank accounts.
The transactions also harbor fewer risks for clients. Bitcoin transactions are secure, irreversible, and do not contain customers’ sensitive or personal information. This protects clients from fraud.
Besides that, Bitcoin users are in full control of their transactions which are equally secure, an aspect that makes it hard for s impossible for merchants to force unwanted or unnoticed charges as can happen with other payment methods. Bitcoin payments can be made without personal information tied to the transaction.
The transaction is also transparent and neutral. Information concerning the Bitcoin money transaction is readily available on the block chain for anybody to verify and use in real-time.
Bitcoin however has several demerits. It suffers low level of acceptance among the business community. It is also faced with volatility due to the lower total value of Bitcoins in circulation and most of its features are still underdeveloped.
In conclusion, Apple Pay has revolutionized the way many will be paying for things one more time.