Following Apple Pay’s much-hyped payment system’s launch and lukewarm reception across many markets, the platform’s release last week in the United Kingdom has already encountered some problems with a double-spend issue being the most notable.
New Apple Pay Becomes Double Pay
Apple Pay can cause an economic misfire with users of the ever popular public transportation service, the Transport for London, under certain circumstances. This has happened often enough to cause an official alert to be disseminated from the iconic transit system regarding the use of this new form of payment.
The problem is when a payment is made from one account, but from more than one device, resulting in the account to be double-charged. So if you enter the system with an Apple Watch and exit with an Apple iPhone, for example, it will bill the account the maximum the second time, even if you paid before from the other device.
In other words, if using one Apple Pay device with Transport for London, you must use the same device throughout, regardless of whether one account links multiple devices or not.
The official statement from Transport for London reads:
"To benefit from daily and weekly capping customers need to use the same device. Data on which devices are paired with each other is not available to us. If two devices linked to the same account are used on the same day they will get billed twice.”
Competing digital currencies like bitcoin protect users from double spending funds through its advanced checks and balances within its algorithmic mining system. Bitcoin “miners” check all transactions and account balances throughout the network in 10-minute intervals, reaching network “consensus” with each “block” of transactions updated on the “block chain.”
Unlike traditional debt-based banking systems that do not fully reconcile their transactions for days, Bitcoin users can have 99% consensus, after multiple confirmations, within one hour.
This coincides with other minor Apple Pay early launch problems in the United Kingdom. These include many banks like The Royal Bank of Scotland, Halifax, Lloyds, M&S Bank and TSB not offering the payment program at launch, but moving it back to the fall. Also, it’s not clear whether the fee structure Apple uses in the United States will work effectively on the other side of the pond.
"In the US, banks were willing to pay 0.15% per transaction to Apple for the privilege of using Apple's platform,” explained Lu Zurawski, head of consumer payments at EMEA, the global payments company ACI Worldwide, to Patently Apple. “That’s not a stretch when US issuers receive a hefty 'interchange' income (paid ultimately by merchants) every time one of their cards is used. But in Europe, interchange fees are being regulated almost out of existence, currently capped at 0.3%.”
“The model only works if Apple's fees for the UK will not be so high as in the US. European interoperability will be key to the long-term success of mobile payments and Apple Pay.”
Digital currency options like bitcoin do not require significant transaction fees just for using the payment option, much less having to tailor the extra costs to each market or obtain private information from users. This charge incurred by the merchants will eventually make its way into the prices consumers pay, creating a cost versus convenience compromise that should give competing payment methods like digital currencies a competitive advantage.