Can Apple Pay and the New iPad SIM Card Overcome Industry Opposition?

Source: Justin Sullivan/Getty Images
Source: Justin Sullivan/Getty Images

While the debut of upgraded iPad models and other new hardware were the headlining news at Apple’s recent media event, the most important news may have been the introduction of two potentially industry disrupting innovations. The first was the activation of Apple Pay, which went live on October 20. The mobile payments system will allow owners of Apple’s latest mobile gadgets to use their devices as digital wallets. For iPhone 6 and iPhone 6 Plus owners, this means the ability to make purchases in brick-and-mortar stores via a contactless process enabled by Near Field Communications (NFC) technology. For iPad Air 2 and iPad mini 3 owners, this means the ability to make in-app purchase with Apple Pay, since those devices lack an NFC antenna.

The second important innovation introduced by Apple did not even garner a mention at its media event. However, like Apple Pay, this innovation also has the potential to change the way people use their mobile devices. For the first time, Apple’s newest cellular-connected iPad models will include an Apple SIM card that will allow users to more easily switch between participating carriers with no long-term commitment. As noted on Apple’s website, participating carriers include AT&T, Sprint, T-Mobile and the U.K.’s Everything Everywhere (EE). Users should be able to quickly switch between these carriers by simply accessing a menu through iOS, rather than physically removing and replacing a SIM card for each carrier.

Apple Pay has been praised for its convenience and its utilization of an advanced security feature known as tokenization, while the new iPad models’ multi-carrier SIM card has been hailed as a consumer-friendly advancement in a wireless carrier industry that has traditionally tried to lock consumers into long-term contracts. However, it now appears that both of these innovations are beginning to get some pushback from parties that are interested in preserving their industries’ status quo.

Apple Pay

Apple Pay: Blocked and shunned

While Apple has found quite a few retailers and merchants who are willing to get onboard with Apple Pay, there are also quite a few notable exceptions. Many of these holdouts are understandably taking a wait-and-see approach to Apple Pay before investing in the NFC-compatible equipment that is necessary to accept mobile payments. However, now it appears that at least one retailer is taking a proactive stance against Apple Pay in the hopes of promoting its own rival mobile payments system.

As reported by Slash Gear, Rite Aid recently stopped accepting Apple Pay after initially supporting it for a brief period when the system rolled out earlier this month. While it was initially believed to be a minor technical issue, leaked documents obtained by Slash Gear seem to suggest that it was a deliberate step taken by Rite Aid in order to stymie what it views as a competing mobile payments platform. “Please instruct cashiers to apologize to the customer and explain that we do not currently accept Apple Pay, but will have our own mobile wallet next year,” stated the alleged Rite Aid internal memo via Slash Gear.

It should be noted that Rite Aid is listed as a participating merchant on the official website for the Merchant Customer Exchange (MCX), a “merchant-owned mobile commerce network built to streamline the customer shopping experience across all major retail verticals.” The system includes a downloadable “CurrentC mobile wallet” app that would presumably compete with Apple Pay. MCX members include many Apple Pay holdouts, including Wal-Mart, Best Buy, Bed Bath & Beyond, and Publix.

Source: Thinkstock
Source: Thinkstock

While it’s understandable that a retailer would want to promote its own mobile payments system over a competing one, it should be noted that the MCX mobile payments system has not even launched yet. In other words, Rite Aid didn’t simply replace one mobile payments system with another; it only limited consumers’ existing payment options. Even worse, there are already indications that even when the MCX system is available, it won’t be as secure as Apple Pay.

Apple’s mobile payments system makes a point of not saving transaction information in order to keep consumers’ purchase histories private. On the other hand, the MCX system is designed to “leverage valuable data” collected about customers’ purchases. While Apple Pay stores users’ financial data in the mobile device’s Secure Element chip, the MCX system will store “users’ sensitive financial information in our cloud vault rather than locally on the mobile device.”

Of course, merchants who refuse to offer Apple Pay in the hope that consumers will flock to an as-yet-unavailable competing mobile payments platform may change their tune if Apple’s system continues to grow in popularity. In the meantime, loyal Apple users always have the option to shop at Apple Pay-compatible competitors to Rite Aid, such as Walgreens.

Apple SIM card is flexible…sort of

Like Apple’s mobile payments system, the new Apple SIM card is also facing opposition from established industry heavyweights that are interested in preserving the status quo. As previously noted, the latest cellular iPad models now feature a new Apple SIM that should allow users to switch between carriers without the inconvenience of physically replacing the SIM card.

Unfortunately, it now appears that Apple’s consumer-friendly feature has been effectively nullified by most of the telecommunications industry. While AT&T, Sprint, and T-Mobile were all listed as participating carriers on Apple’s website, it appears that T-Mobile is the only company that will use the Apple SIM card as it was designed to be used.

As explained in a clarifying support document posted to Apple’s website, iPads purchased at Sprint Stores “will only carry iPads with legacy Sprint SIM cards (not Apple SIM cards).” Similarly, if a customer selects AT&T as their iPad Air 2 or iPad mini 3 carrier, “AT&T dedicates [the] Apple SIM to their network only.” AT&T has the most restrictive policy, since an iPad will be tied to its network once it is selected as a carrier, regardless of where an iPad was purchased. On the other hand, if a consumer buys an iPad at the Apple Store and chooses Sprint as a carrier, they will still have the multi-carrier compatibility feature as intended by Apple. However, since both measures undermine the benefit of having an Apple SIM card, it raises the question of why AT&T and Sprint are even listed as participating carriers.

AT&T and Sprint’s policies leave T-Mobile as the only participating carrier that is leaving the Apple SIM card functionality fully intact. T-Mobile already has a reputation as a disruptor of the wireless industry through its “Uncarrier” initiative that ditched the industry’s traditional long-term contracts. T-Mobile CEO John Legere appeared to reiterate his company’s commitment to Apple SIM in a recent tweet. Kudos also to Verizon, a non-participating carrier that was honest enough to decline support for the Apple SIM card from the start.

Although some companies are trying to hinder the adoption of Apple’s innovations in the mobile payments and cellular network industries, the success or failure of Apple Pay and the Apple SIM card will ultimately be decided by consumers. If customers flock to retailers and carriers that offer these services and avoid those that don’t, then the rest of the industry will be forced to follow, regardless of how disruptive the changes may be at first.

Follow Nathanael on Twitter (@ArnoldEtan_WSCS)

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