Apple Pay

Apple Pay In The UK

Coming out of the All-Star game last weekend, it is surprising that the curveball of the week didn’t come out of baseball. In fact, it didn’t even get pitched in the United States. No, this week in an epic fit of Apple being Apple, Cupertino decided to surprise the world and release Apple Pay in the U.K. about a week earlier than anticipated.

And with more of a pratfall-esque stumble than Apple’s normally well-choreographed glide into the marketplace from stage left. On Sunday, July 12, HSBC accidentally tweeted out that the service would be launching in two days on July 14.

So much for secrecy — as within minutes of the Twitter flub, the world started reacting.

“Even the smallest slip of the tongue on social media can affect the markets, and HSBC’s blunder on Sunday was a great example,” noted Gareth Mann, CEO of data analytics provider Digital Contact. “Our data tracker, which crunches millions of data points a second, showed a huge spike in noise around Apple just after 9 p.m. on Sunday, July 12.”

The price of Apple unsurprisingly climbed, and U.K. users got warmed up and ready for their crack at the world’s most talked about mobile payments platform.

How’s it going? Two days in, it’s a little hard to tell. But we have the high and low points of the week to help you understand how Apple Pay U.K. stacks up against the Apple Pay original recipe in the U.S.

Fees — They Pay Less (But Also Have Less To Pay With)

When Apple Pay launched in Oct. 2014, it came with a feature for its card issuer partners that many found surprising — a cut of their interchange fees.

In the U.S. Apple has gotten the banks to agree to a little “toll booth” that collects a 15-basis-point (0.15 percent or $0.15 on a $100 transaction) toll from the issuer each and every time their card is used at a merchant.

U.K. banking partners have also reportedly agreed to a toll but one that is much, much lower, according to reports in the Financial Times.

It is not known exactly what the deal struck between Apple and its issuer partners in the U.K. is — those details remain undisclosed. According to banking insiders sited by FT, it is “a few pence” per £100 ($156) transaction.

“The proposition for Apple in the U.K. is more about building product sales and less about an extra revenue stream,” said one banker.

It also bears noting that in the U.K. there is far less interchange fee money floating around. For while they are alive and well in the U.S., they are very drastically legally limited everywhere across the pond, including Britain, such that 15 basis points could easily amount to as much as half the total fee in the U.K., as opposed to a small fraction of it in the U.S.

“In Europe, interchange is next to nothing in several sizeable countries and going to probably be next to nothing if the regulators have their way,” MPD CEO Karen Webster wrote last October. “It’s unlikely that issuers, who will get hardly anything when their cards are used, will be willing to pay Apple anything like the fees it is getting from U.S. issuers. Apple will just have to be happy selling iPhones and making money some other way. It’s hard to see Apple Pay generating the same sort of excitement from European issuers.”

But it seems that Apple found a way to get some of that issuer excitement. All they had to do was cut those fees a lot.

Just not quite enough for everyone.

Banks — A Series Of Unfortunate (And Some Fortunate) Events

It has not been a good week for HSBC and Apple. First they let the cat out of the bag about the whole early surprise launch thing. And then, when that launch that they forgot to put “spoiler alert” in front of on Twitter actually happened, they were nowhere to be seen.

Somewhere between announcing that it was ready to roll last Sunday and the actual launch on Tuesday, HSBC changed its status from “ready to roll on day one” to “ready to roll pretty soon, like at the end of the month.” HSBC clarified that it has always been its intention to launch toward the end of July, even though as of Monday of last week they were still listed as one of the banks launching the service — 24 hours after they alerted everyone as to the real launch date.

As of Tuesday, its status had switched to “coming soon,” but HSBC insisted that it (was in no way being punished by Apple for screwing up the launch and) has definitely always planned to release on July 28.

HSBC isn’t the only “coming soon” among major U.K. banks. Shortly after Apple Pay went live in the U.K., Barclays — the main holdout — announced that the service was “coming soon” for its cardholders. That “coming soon” hasn’t been defined much past ruling out “never” as a possibility. Bank of Scotland, Lloyds, M&S Bank, TSB, Coutts and Halifax all reportedly plan to launch the service later this year.

So who was on board with Apple Pay on day one? Every bank they said would be there back when the U.K. expansion was officially confirmed in June (except HSBC). Santander, Nationwide and Royal Bank of Scotland (including NatWest and Ulster Bank subsidiaries) were all ready to roll on day one.

Merchants (And That Weird Spending Cap)

Apple Pay in the U.K., according to reports, launches with a very comparable merchant set in the U.K. as it did in the U.S. The most recognizable names (particularly to British consumers) are Boots UK, BP, Costa Coffee, Co-op Food, KFC UK, Le Pain Quotidien, Liberty, Lidl, Marks & Spencer (M&S), McDonald’s UK, Nando’s, Post Office, SPAR, Starbucks, Subway, TfL, wagamama and Waitrose.

On the “coming soon” list are Screwfix, Wilko, EAT, Costcutter, Five Guys, JD Sports, Dune and New Look. The main grocery chains in the U.K. (Tesco, Sainsbury’s and Asda) don’t accept Apple Pay yet.

Additionally, PayPal-owned Braintree has announced Apple Pay support in the U.K. for all the apps that it powers.

All in, Apple Pay is in about 250,000 retail locations at its launch — basically the same as its early numbers in the U.S. It does bear noting, however, that as a smaller country with fewer merchant locations in total, 250K does represent a greater penetration by percentage than Apple enjoyed in its home market.

But in a foreign market it deals with foreign rules — the most bedeviling of which (apart from those interchange caps) are the caps on contactless payments in the U.S. Though not common in the U.S., contactless cards fared somewhat better in Europe, and as a security measure, those transactions are limited to be £20 (about $31). That limit will climb some in the next few weeks to £30, which for many consumers and merchants is still too low a point for Apple to really take hold.

It is worth noting that U.K. merchants do have the option of upgrading their backend software systems to recognize biometric scans like Touch ID as a substitute for a PIN in a card transaction. This would remove the cap.

Consumers Are Excited! (If They Know What You’re Talking About!)

Unfortunately, it seems customers have not quite heard about it just yet.

When asked by FT if they planned to use Apple Pay, most city workers simply had no idea what they were talking about.

“It’s obviously under the radar,” said one.

Not a description of Apple Pay we too often hear here at PYMNTS.

But one that was oddly recurrent in the coverage of Apple Pay. While some were particularly excited, most of the man-on-the-street interviews indicated consumers were a little unsure about Apple Pay.

“I have no idea what Apple Pay is,” said one shopper getting a coffee on Tuesday in Waitrose, one of the numerous retailers that launched the service.

And though most of the negative reviews were more about consumers who couldn’t use it yet because their bank didn’t support it, there were a few hiccups here and there about usability, particularly on the London Underground.

But on the whole, consumers who used it rated it highly.

It’s only been a week. With Brits still trying to figure out what Apple Pay is, banks still signing on, HSBC definitely not trying to work its way out of the dog house and many merchants left to capture, it may take some time to make an educated judgment about how well Apple Pay exports.

But we’ll make sure to guide you through all those steps.


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