Apple’s “Scary Fast” product news event this Halloween has sent shivers of joy down the spine for tech fans. The super-fast M3 chip will no doubt turbocharge processing speeds and push already-impressive hardware to the limits of what it can do. But away from the bright glare of the media’s spotlight and fanfare, another recent Apple push is what’s set to truly change the game.
As part of its 25th October launch of iOS 17.1, Apple also rolled out a new iPhone Wallet app – now integrated with the UK’s Open Banking framework. And it’s going to transform the way consumers and businesses pay.
Managing Director at Tribe Payments.
What’s new in Apple Wallet
The Open Banking integration is a big deal – and promises big ramifications. Previously, Apple’s Wallet app stored UK users’ credit card and debit cards to make tokenized in-store or online payments, along with viewing card transaction histories. Thanks to iOS 17.1’s integration with the UK’s Open Banking API, Apple’s iPhone users in the UK can now view the balance of their current accounts, bank cards and credit cards within Apple’s Wallet app.
Banks currently supporting this move include big names like Barclays, Monzo, Starling, HSBC, Lloyds, and Royal Bank of Scotland (RBS) – with more banks likely to join over the coming weeks. While disintermediation is undoubtedly a concern for some banks, it’s hard to imagine most banks refusing the opportunity and risk losing their iPhone-owning customers. Banks linked to Apple Wallet typically see a rise in transaction volumes and will benefit from increased customer stickiness.
Unlocking Open Banking data, shared with users’ consent, means Apple can now give UK customers real-time information that can aid personal financial management. Being able to check available balances can empower people to make more informed purchasing decisions. Instead of adding to rolling balances on credit cards – and incurring more interest – users can opt to pay directly from their current account or linked debit card.
If usage figures are anything to go by, Apple could not have timed its entry more perfectly.
The UK’s Open Banking market is one of the most advanced in the world, with around 11% of UK consumers and 17% of small businesses being active users of Open Banking. It also reached its 11 million+ payments milestone in July 2023 – a 9.3% increase in total payments from the previous month, highlighting that people and businesses are becoming more comfortable with fast account-to-account payments.
How Apple is tapping Open Banking to grow its user base
But the bigger ramification of Apple’s Open Banking play is that it’s opening another dimension in the battle for “top of wallet” and Big Tech’s push into financial services. While UK consumers may have previously, and unthinkingly, reached for their credit or debit cards to pay, all banks had to worry about was competing with each other to be the card of choice. Meanwhile, merchants were somewhat of a captive audience for the card schemes – although merchants largely welcome the convenience of card payments, the fees charged are a big bone of contention.
But now, the Apple-Open Banking combo gives consumers the option to make account-to-account (A2A) payments and cut out cards altogether. For businesses, A2A payments promise higher conversion rates, reduced transaction costs, and real-time settlement. No need for customers to type in card or account details at checkout, as their payment details are securely stored to enable faster, smoother one-click payments.
It’s highly unlikely that the card schemes like Visa, Mastercard and American Express will see this as an immediate threat to their business model, but it’s certainly Apple firing a shot across the bows and amplifying its intention of becoming a financial ecosystem.
In 2022, it acquired Credit Kudos, a UK entity licensed as an Account Information Service Provider (AISP) and an FCA-regulated credit reference agency. That acquisition has given Apple access to Open Banking data and banks’ customer credit data for both individuals and small businesses. When combined with its own ingenious data tools, imagine what clever services Apple will be able to conjure up to move beyond the limitations of traditional credit data and enhance financial behavioral data. Perhaps it’ll start looking at the potential of Central Bank Digital Currencies (CBDCs), a digital currency issued by a country’s central bank. The digital pound, for example, will likely need a digital wallet to interface with. The central banks won’t develop these wallets, but Apple could offer the perfect home.
Why Open Banking needs greater interoperability
It’s no surprise that the UK’s strong Open Banking framework was such a draw for Apple, but for Open Banking to really fulfil its potential, it needs to be interoperable with more real-time payment systems and across borders. In the US, Open Banking is some way off due to a big interoperability gap with the rest of the world. It’s not the first time the US has been caught napping – it took several years for EMV to be rolled out there, long after the rest of the world had adopted it.
But a glimmer of hope came in October 2023, when the US Consumer Financial Protection Bureau (CFPB) proposed its long-awaited Personal Financial Data Rights Rule (Section 1033), enabling people to consent to sharing data about their use of checking and prepaid accounts, credit cards, and digital wallets. This will require consumer financial service providers to share data at the user’s direction with other companies in the ecosystem that offer more attractive products and services.
While Open Banking in the US is still at the development stage, Apple now has a head-start over other players and can take the lessons it will learn from its UK Open Banking experience to steam ahead of US financial institutions.
But the broader picture shows how banks are still playing catch-up to tech giants when it comes to offering seamless and personalized consumer payment services. As customers digitize, banks and merchants need to provide more intuitive experiences by leveraging Open Banking APIs and tokenization – but they’re held back by a reliance on legacy infrastructure with limited functionality. Frustrated by clunky and friction-filled payment experiences, customers get fed up and go elsewhere.
Banks will need to provide a single platform that can support all channels and transaction types, allowing merchants to bring together data and insight from every customer touchpoint. Tribe Payments’ modular technology and API-driven processing platform enables banks to make just one integration to access global connectivity, while merchants can gain access to intuitive multi-channel payment experiences, including Open Banking facilities.
Yes, we can all talk about APIs and real-time transaction feeds. But data’s real value comes from being able to anticipate customer behaviour and create hyper-personalised experiences. And increasingly, that’s what customers themselves are demanding. It’s through enhanced data analytics and insights that innovations spring from. Apple is living proof of delivering seamless customer experiences across multiple devices and channels, and its move into Open Banking challenges banks that provide payment services to merchants to up their game.
