This article was produced by Olswang LLP, which joined with CMS on 1 May 2017.
After Apple has announced the launch of its Near Field Communication based mobile payment system in the US in October, questions have arisen as to whether and when Apple Pay will be launched in Europe and which additional obstacles the company would need to tackle to prepare a market entry in Europe. Rumours predict an Apple Pay European launch in 2015, following a successful rollout in the US.
While Europe might look like a promising market thanks to an increasing number of retailers already using NFC terminals to support mobile and contactless payments, Apple might face significant challenges in the Old Continent.
First of all, despite Europe's long-lasting familiarity with mobile payment solutions, NFC in particular, and several attempts to conquer the market, a critical level of market acceptance both on an end-user and retailer level has not been reached.
Second, Apple would need to comply with the EU's strict regulatory e-money and payment regime, which imposes license requirements on each undertaking seeking to issue e-money or to offer payment services within the EU. Whether and to which extent this will apply to Apple Pay depends on the details of the technology used and the payment flows involved.
As announced by Apple, Apple Pay will mainly be based on NFC and Touch ID technology. In addition, payment tokens will be created (as a replacement for the users' credit or debit cards) and stored on a secure chip on the user's smartphone. When a payment is made at a participating store, an NFC connection will be built between the user's smartphone and the merchant's POS terminal, allowing the token to be sent to the merchant's network. The payment will then be authorised by the user through their fingerprint scan. The funds will eventually be credited to the merchant's account after a successful validation by the issuer of the credit or debit card. It remains to be seen how European e-money and payment regulators will react to an introduction of Apple Pay to the EU.
Finally, Apple would also need to ensure that the collection and processing of the users' personal (payment) data are justified under European data protection laws and consider that an impending new EU general data protection regulation might introduce privacy requirements that are even stricter than the ones currently in force.
