Apple Pay is about the take over brick-and-mortar retail with one big wireless swipe. Small businesses should (ahem) pay attention to how the technology works. Even more importantly, they should pay attention to how it will reach mass adoption.
The truth behind this upstart transaction system, which debuted today, is that it takes advantage of about 220,000 readers in places like McDonald's and Walgreens that were installed a few years ago. Back then, we all thought Google Wallet on an Android phone would take over as the credit card replacement technology.
Walking into both a McDonald's and two different Walgreens stores today, I found out that never really happened. Instead, I walked up with my purchases, pulled out the iPhone 6, and held the phone about three inches away from the terminal. Up popped a prompt to place my thumb on the fingerprint reader and approve the transaction. It's super simple.
The NFC (near-field communication) terminal at my local McDonald's has been sitting and waiting patiently for a customer for over two years. I first noticed the wavy wireless logo, which looks like a sound-wave moving to the right, in about 2012. The cashiers at both McDonald's and Walgreens both told me they'd never seen anyone use the reader.
(Earlier today, I added my bank card to the Apple Passbook app on my phone, but it took about 5 minutes. It's all an attractive, intuitive process--something you'd expect from Apple. My credit card appeared on the screen in digital form, reminding me that it is all legit. After buying four different items, I realized how efficiently it all worked.)
Apple Pay will work at retail stores but it could also become the defacto standard for online purchases that add an extra security step--namely, proving your identity using the Touch ID fingerprint reader. I'm impressed with how fluid it works even at launch.
There's a good lesson here for small businesses, beyond the fact that it's important to follow these tech trends and start preparing for the inevitable. In his book How We Got To Now, author Steven Johnson explains how breakthroughs in science and technology often lead to what he calls the "hummingbird effect"--essentially, a way to "piggyback" ideas on top of one another that helps catapult them into mainstream consciousness.
In his book, Johnson focuses mostly on inventions that play off of one another, like book printing and eyeglasses. He's fascinated by the science and the correlations.
Yet, we see the same effect in small business. When cameraphones became commonplace, more people starting using Instagram. When rental car prices in major cities skyrocketed and gas prices went through the roof, up popped Uber. As a business strategy, it's always a good idea to look for the razor blades and the razors, but it's even more important to see which infrastructure pieces are falling to place and then pounce on that opportunity.
One example: I've maintained for a while that there's a potential for a massive hummingbird effect when it comes to electric vehicles (EVs). Tesla seems quite aware of this trend. If small business can focus enough energy on the problem, no pun intended, there could be a massive uptick in EV purchases if there are enough electric fueling stations, mobile payment systems, and battery tech innovations.
There are many other opportunities where the railroad tracks are already in place and the next step is to build the railroad. You just have to look for them. Apple was smart to realize how the NFC infrastructure was already there, but Apple Pay does more than just leverage the tech--they simplify it. It's also no secret that Apple takes a cut of the transactions fees from the banks and could parlay the transaction system into other rewards and incentives for iPhone users. The hummingbird wings have just started to flap.