As Questions Linger, Discover Says ‘Me Too’ to Apple Pay

Discover Financial Services cardholders will be able to add their payment cards to Apple Inc.’s Apple Pay mobile payment scheme, the card brand confirmed Wednesday.

“Discover is in discussions with Apple to be able to add Discover cards to Apple Pay in the future,” a spokesman tells Digital Transactions News. He declined to discuss further details such as when. “We do participate in multiple wallets as both an issuer and network, and continue to work to make mobile commerce a reality in the United States.” The Riverwoods, Ill.-based card network was conspicuous by its absence from Apple’s Tuesday announcement of Apple Pay, during which the computing giant included mention of deals with network giants American Express Co., MasterCard Inc., and Visa Inc.

It’s not surprising Discover would want to climb on the Apple Pay bandwagon. Apple’s impact on mobile payments could be monumental, payments professionals say, boosting it and mobile commerce. Apple Pay is a near-field communication (NFC)-based mobile payment service that consumers can use with the upcoming iPhone 6 and iPhone 6 Plus to make tap-and-go point-of-sale and in-app transactions.

Still, while Apple answered a number of questions on Tuesday, it left many more on the table. And experts caution it will be some time before Apple Pay’s impact is felt. “They have basically set the ground work to start to drive some significant levels of mobile payment activity,” Ron Shevlin, senior analyst at Boston-based Aite Group LLC. “The thing to keep in mind is while they have set the stage for that, we won’t see any significant numbers for some time.”

He explains that’s because it will take some time for consumers to adopt the iPhone 6 variants, which are scheduled for release Sept. 19. Shevlin expects younger consumers to be more inclined to use Apple Pay than older generations. “The reality is for many people over the ages of 40 and 50, most of them really don’t care,” Shevlin says. “Their behavior is ingrained. But younger consumers, who are going to be faster adopters of the iPhone 6 and new technologies, will be more likely to switch [to mobile payments].”

Then, of course, there is the number of U.S. merchant locations that accept contactless payments, pegged at an estimated 220,000, which pales in comparison to the more than 5 million merchants that accept payment cards.

Contactless readers could be part of the POS equipment merchants have to install to accept payments made with credit and debit cards that comply with the Europay-MasterCard-Visa standard, Shevlin says. But merchants may willingly want contactless readers because consumers are likely to want to pay that way, he says.

Investment firm William Blair & Co. LLC is heartened by McDonald’s Corp.’s inclusion in Apple Pay. “McDonald’s was a key leader in driving acceptance of electronic payments within the quick-service restaurant channel,” it says in a research note. “We understand McDonald’s will begin accepting NFC payments in mid-September.”

“Apple has proven it can create demand,” Shevlin says. “When Apple does something, it legitimatizes it to a certain extent. This is Apple. They have a ton of merchants and more importantly they have networks and issuers on board.”

Marc Castrechini, vice president of product management at Merchant Warehouse, a Boston-based payment-services company, echoes Shevlin. “Apple has a unique ability to be the tipping point for the mainstream adoption of technology,” Castrechini says. Consumers will expect to be able to use mobile payments at many stores from Whole Foods to McDonalds, to Macy’s to Bloomingdale’s. “We’ll see both consumers and merchants move to adopt mobile payments very quickly,” he says.

Unknown, however, is how Apple Pay might work its way into the payments industry beyond its initial group of partners. “There are still questions on that table that I believe will be answered as Apple Pay evolves,” Castrechini says. “Will smaller credit and debit card issuers be accessible through Apple Pay? What deal did Apple cut with the major credit card issuers? Also, how will value propositions like loyalty and offers come into play? These are questions that I think we’ll see Apple answer for us in the very near future.”