• by Joe Abruzzo , October 8, 2014

Apple recently introduced a smart watch, Apple Pay and two new versions of the iPhone 6, which offer screens larger than the iPhone 5 and the Samsung Galaxy S5.

However, one can argue that the most important part of the announcement deals with Apple’s introduction of a “near field communication” (NFC) capability to the iPhone 6, which will enable

Apple Pay, a mobile pay app, as an add-in to Apple Passbook.

With NFC, just enter a security code, tap or wave your phone near the payment terminal. The transaction is validated through a security chip. The phone and POS terminal are notified that the transaction has been completed. You can earn loyalty points and redeem coupons.

NFC isn’t new.  With the iPhone 6, Apple is playing catching-up with Android-based NFC-equipped devices from Samsung, HTC, Nokia and Google’s Nexis - - all introduced prior to 2013. Beyond mobile pay, NFC also allows for rapid short-range exchange of contact info, directions and videos between NFC-equipped phones, a capability Samsung was promoting in 2012.)

Apple Pay isn’t the first mobile payment app – it will compete for business with existing mobile payment services like PayPal’s One Touch and Venmo apps plus services that use NFC functionality like Google Wallet and Softcard (formerly ISIS Mobile Wallet, the joint venture between AT&T, T-Mobile and Verizon).

There’s no indication that Apple Pay delivers superior functionality versus other NFC apps. Apple’s advantage is their cache of about 800 million iTunes accounts globally, each with a card on file.

Mobile payment apps leveraging NFC have had limited success because there isn’t yet widespread adoption of NFC among retailers.

Nevertheless, Apple’s foray into the space is probably good news for the mobile payment app industry. Consumers can expect to hear about mobile payment solutions from Apple, the carriers selling NFC-equipped Apple phones, the credit card issuers supporting Apple – all raising visibility for mobile payment apps. This may be the ideal time for manufacturers of Android-based NFC-equipped devices to start raising awareness of their solutions.

Consumers rarely change banking relationships and they’ve become increasingly jaded and resistant to new credit card offers. Given the inertia in changing consumers’ financial habits, stakeholders must take the following steps to speed the adoption of mobile pay technology:

• Retailers need to provide consumers with more opportunities to use NFC-enabled mobile payment apps. Apple and others offering mobile payments have assembled lists of retailers offering NFC payment. These lists need better alignment with the places where consumers shop most frequently.
• Both mobile payment platforms and financial institutions must do their part to educate consumers to the relative advantages of using a mobile payment app (speed, security) versus plastic credit cards.
• All involved parties must demonstrate the ease of using mobile payment apps. “How-to” online videos currently available on YouTube are a good beginning.
• Card issuers must offer short-term incentives to drive trial and repeat usage of mobile payment apps. For example, HSBC Hong Kong is offering a perpetual annual fee waiver, $100HK (about $13 U.S.) in RewardCash for using their mobile payments program for 3 transactions within 30 days from the activation date and 3X RewardCash for all mobile payment transactions.
• To whatever extent possible, mobile payment platforms, card issuers and retailers need to exceed consumer expectations and encourage them to share their experiences with their social networks.

These five steps will be key to mobile payment apps achieving critical mass, the point at which the mobile apps will become self-perpetuating.