Apple (NASDAQ:AAPL) won't unleash its new payments platform, Apple Pay, until next month. Meanwhile, the company is expected to hold an event on October 21 to announce the new iPads.
I expect the new iPads will complete the Apple Pay ecosystem, which currently consists of the payments platform and the hardware to authorize payments. It's missing the hardware to accept payments, however, and that's where the new iPad fits in.
Retailers are already using iPads
A lot of retailers have already adopted iPads as their point of sale, or POS, terminals. iPads can be extremely cost-effective for small businesses like coffee shops and food trucks, but they can also provide benefits to large retailers as well.
For a new retailer just starting up, the cost of an iPad and all of the software and extra equipment necessary to turn it into a full-fledged POS system is about $1,500. Comparatively, a traditional cash register costs about $4,000. That's why you'll see a lot of newer shops and boutiques open with iPads on the counter instead of a register.
For bigger retailers, ones that have already sunk the cost into registers and a lot of infrastructure behind them, there are still benefits to making the switch. iPads have been shown to speed up transactions, which is key for increasing sales per hour. Additionally, iPads are capable of tracking inventory across multiple terminals, meaning retailers can save time figuring out how much they need to restock.
The speed of transaction and other benefits to retailers improve if Apple supports Apple Pay in the new iPads. For example, not only is Apple Pay quick, it's capable of incorporating coupons and loyalty rewards cards into the transaction. That ought to increase adoption and use for retailers, which gain valuable data from rewards programs.
Now is the time to switch
Although there are several benefits to switching to an iPad checkout system, most retailers aren't going to switch unless there's a big force that overcomes their inertia. We may have seen that force this year. Microsoft (NASDAQ:MSFT) dropped its support of Windows XP, which many big retailers still use to run their POS systems. Additionally, we've seen a lot of security breaches from hackers stealing credit card information from large retailers.
Hackers took advantage of Microsoft's old operating system and the fact that credit card data is transferred to retailers' computers during transactions. To be fair, Microsoft strongly encouraged XP users to upgrade to a newer OS, and the security breaches at retailers like Target and Home Depot likely could have been avoided had they upgraded.
The problem also could have been avoided by using chip and pin security on credit cards instead of transferring credit card data using a magnetic stripe. This led card issuers to send some customers new cards supporting the technology, but unless retailers change their terminals, they're essentially no more secure.
Fool contributor Chris Neiger points out that U.S. retailers have until October of next year to support chip and pin credit cards, which may also result in wider adoption of NFC payment terminals necessary for Apple Pay. The iPad is able to support chip and pin payments with an adapter, much to the benefit of small retailers that already use iPads. That also means big retailers might take the opportunity to switch to iPads instead of buying new terminals, especially if they also support NFC payments.
Boosting iPad sales
iPad sales have slumped this year as consumers hold onto their old tablets, and the market is beginning to saturate. A new round of iPads focussing on Apple Pay and benefits to retailers could spur a big upgrade cycle for Apple, which it could certainly use after iPad sales have disappointed for the last couple of quarters.
The iPad has already done a good job replacing a lot of personal computers, now Apple is aiming to go after computers in the business world with its enterprise partnership with IBM. Retail represents one of the biggest PC markets left, and Apple could make inroads with the iPad in an area it's never really participated in before.
What's more, if Apple succeeds in getting more iPads in retail settings, it could boost adoption of Apple Pay. This is the Apple ecosystem at work.
Adam Levy owns shares of Apple. The Motley Fool recommends Apple and Home Depot. The Motley Fool owns shares of Apple, International Business Machines, and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.