Apple Pay: Returning Banking to its Roots?

By reintroducing touch as fundamental to the payment transaction, Apple Pay may be connecting us to the medieval roots of banking.

Steven Spencer-Steigner is a Senior Strategy Director at Greenberg with extensive experience in the consumer tech and financial sectors.

Steven Spencer-Steigner is a Senior Strategy Director at Greenberg with extensive experience in the consumer tech and financial sectors.

Google Wallet, V.me, Softcard, PayPal, and others have tried to entice consumers into mobile payment for years, with minimal traction. In stark contrast, The Wall Street Journal reported last month that Apply Pay secured one million card activations within 72 hours of launch,^1 with what would have seemed to be voodoo just a few years ago. As banks and card companies anticipate the mobile payment tipping point, the question is whether the new player they’ve allowed into the payment ecosystem will change the rules of the game.

Apple didn’t invent biometric technology or tokenization. But with Touch ID technology as central to its mobile payment offering, it has combined existing technologies in a new way, subordinating the functional (authentication, encryption, sandboxing) and prioritizing the experience of payment through gesture and touch. 

Why is this significant? A long-standing barrier to adoption of mobile payment has been concern over security and privacy by merchant and consumer alike.^2^4 Greenberg's own research over the past three years confirms that trust is a critical ingredient to the success of the mobile payment ecosystem. So why would Business Insider find that 58% of readers say they would “absolutely” use Apple Pay and that only 8% do not believe it’s secure?^5 Is this just another example of the brand’s Reality Distortion Field? Or has the company found the secret to a bright mobile payment future?

The potential power of Apple Pay lies in linking touch and trust to protect the integrity of the transaction. In our virtual society, this seems almost, well, medieval. In fact, it is. From handshakes to fist bumps, from hugs to high-fives, touch has always been essential to establishing or confirming trust. Some say the origins of the handshake go back a few thousand years where trust was demonstrated by showing an open hand as evidence of the lack of a weapon. The relationship between touch and trust could also be seen as moneychangers in major medieval European towns began to “hold coin.” Their evolution into deposit banks (essentially, payment intermediaries) also confirmed the correlation between trust and the physicality of the transaction.^3

Fast-forward to the 21st century. The considerable body of research conducted by evolutionary psychologists demonstrates that the strong relationship between touch and trust continues^6. In one study^7, noted University of Pennsylvania psychologist Robert Kurzban had participants choose either to cooperate or compete with a partner for a limited amount of money. An experimenter gently touched some of the participants as they were starting to play the game. It was just a quick pat on the back, but it made a big difference: those who were touched were more likely to cooperate with their partner.

You may not get a pat on the back when using Apple Pay, but the fact that touch is now fundamental to the mobile payment experience may be the key to overcoming a primary barrier to adoption. Whether or not Apple recognized the atavistic power of “making your mark” with something as unique as a fingerprint, no other brand has made this connection. 

While security experts have cited concerns over lifted fingerprints or weaknesses at the point of initial card entry, the jury is still out on whether Apple Pay will achieve world domination in mobile payment. However, if there is a tipping point, it will most certainly flow from how Apple has incorporated touch, as fundamental to what makes us human, as part of the payment experience.

 

By making mobile payment reliant on touch, Apple may be overcoming an important barrier to adoption.

 
Evolutionary psychologists have demonstrated a strong relationship between touch and trust

Evolutionary psychologists have demonstrated a strong relationship between touch and trust

 
^1The Wall Street Journal online, "Apple CEO Tim Cook Happy With New Apple Pay Service," Daisuke Wakabayashi, October 2014 ^2Kansas City Federal Reserve Bank Economic Review, "Mobile Payments: Merchants' Perspectives," Fumiko Hayashi, Terri Bradford, Second Quarter 2014 ^3Journal of Economic Literature Classification Codes, "Payment Intermediation and the Origins of Banking," James McAndrews and William Roberds, August 1999 ^4Mobilemarketingwatch.com, "Top 3 Barriers to Adoption in Mobile Payment," Michael Essany, May 28, 2013 ^5Business Insider, "Retailers Like Wal-Mart Have Started A War Against Apple That They Have No Chance of Winning," Steve Kovach, October 28, 2014 ^6DePauw University, Genetic, Social, and General Psychology Monographs, “The Communicative Functions of Touch in Humans, Nonhuman Primates, and Rats: A Review and Synthesis of the Empirical Research,” Hertenstein, M, Verkamp, J, Kerestes, A, Holmes, R, 2006 ^7Trust, reciprocity, and gains from association: Interdisciplinary lessons from experimental research (Elinor Ostrom and James Walker, Eds), “Biological Foundations of Reciprocity,“ Robert Kurzban, Sage Publications, New York, 2003

^1The Wall Street Journal online, "Apple CEO Tim Cook Happy With New Apple Pay Service," Daisuke Wakabayashi, October 2014

^2Kansas City Federal Reserve Bank Economic Review, "Mobile Payments: Merchants' Perspectives," Fumiko Hayashi, Terri Bradford, Second Quarter 2014

^3Journal of Economic Literature Classification Codes, "Payment Intermediation and the Origins of Banking," James McAndrews and William Roberds, August 1999

^4Mobilemarketingwatch.com, "Top 3 Barriers to Adoption in Mobile Payment," Michael Essany, May 28, 2013

^5Business Insider, "Retailers Like Wal-Mart Have Started A War Against Apple That They Have No Chance of Winning," Steve Kovach, October 28, 2014

^6DePauw University, Genetic, Social, and General Psychology Monographs, “The Communicative Functions of Touch in Humans, Nonhuman Primates, and Rats: A Review and Synthesis of the Empirical Research,” Hertenstein, M, Verkamp, J, Kerestes, A, Holmes, R, 2006

^7Trust, reciprocity, and gains from association: Interdisciplinary lessons from experimental research (Elinor Ostrom and James Walker, Eds), “Biological Foundations of Reciprocity,“ Robert Kurzban, Sage Publications, New York, 2003