SECTION 2: Case Study (30 marks) Apple Pay: Taking Mobile Payments Mainstream After years of predictions that mobile payment would replace cash and credit card, Apple is leading the way with its Apple Pay application. In fact, the ability to pay for transactions with a mobile device did not gain popularity in the United States since long time, although there were different players such PayPal, and Google Wallet which tried to take advantage of the smart phone revolution by creating a payment app that gave just about every smartphone the potential for mobile payment. As with every new technology that involves paying for things, consumers have concerns about the security of mobile payments. Apple took security to a higher level, requiring a fingerprint which makes the process much more secure than the more common safeguard of entering a passcode. And if mobile device is ever lost or stolen, the owner can use its Find My iPhone feature to immediately lock down Apple Pay or even wipe the device completely clean. In addition to security concerns, convenience is the biggest attraction for consumers. Setting up any of the existing mobile payment apps takes time and effort. With Apple Pay, consumers can do the transaction down to one-touch process. That's quicker than swiping a card and going through the typical menu, not to mention quicker than inputting a passcode. For mobile payment to penetrate the market, consumer acceptance is necessary, but companies face a double challenge in making such a technology successful. Consumers won't adopt it if retailers don't accept it, and retailers won't invest the resources necessary to accept it unless there is a sufficient consumer demand. However, thanks to Apple the situation is changing rapidly. Apple signed up far more retailers than all the previous mobile payment providers combined. Striking partnerships with top national brands across a variety of categories that will give consumers plenty of opportunity to use the service. Page 3 of 4 Given the great potential of this market, Google has abandoned Google Wallet. Samsung Pay is also intended to get more popular as well. Banks such as Capital One and JP Morgan are intending to keep payment transactions in the banking business with apps of their own. The mobile payments leader has long way to go before reaching critical mass as Apple Pay is used for few retail transactions. Additionally, the complexity of the payment industry, changes in consumer payment behaviors, and new technology can certainly upset Apple Pay. Questions: 1. Describe Apple Pay; explain its objectives and uses. 2. Define the Value Delivery Network and explain how it was applied by Apple Pay