The Use Case of Apple Pay for Recurring Payments

Have digital wallets poised to take the lead in recurring payments?

Apple's introduction of Apple Pay Merchant Tokens (also called MPANs) certainly removes a major barrier that prevented some merchants from using them for many recurring or deferred payment use cases. MPANs have stepped up to bat in the big leagues, the convenience and security that digital wallets offer one time payments are now in play for recurring payment use cases, like billing and subscriptions. 

While other digital wallets have yet to clear a path toward recurring payment support, Apple Pay has ensured that digital wallets remain an important and prevalent part of the payment experience.

Apple Pay’s Entry into Recurring Payments

When Apple Pay first hit the payments scene, it served as a convenient one-time-use payment method. 

Today, Apple Pay is breaking new ground as one of the first digital wallets to support recurring and deferred payments like when someone reserves a hotel room but is not charged until months later just before boarding arriving.

The introduction of Apple Pay Merchant Tokens (MPANs) has rocked the boat for traditional credit cards, enabling new support for important payment use cases like billing and subscriptions.

 MPANs are different from Apple pay’s predecessor device-bound payment tokens, in that they are tied to the merchant, not the phone that was used to provision the token. This way, as cardholders update or change phones, the payment token remains active. Furthermore, merchants that store mPANs can receive updates to that payment method via Apples notification service in the event the underlying card changes or is closed. 

When using MPANs for recurring payments, you enable your payment system to handle:

• Flexible payment amounts based on consumption or promotional pricing
• Flexible payment frequency
• Fixed payment amounts and frequency
• Installment payments

Additionally, MPANs provide an enhanced user experience for both you and your customers. While your customer enjoys a seamless payment experience, MPANs can support additional metadata that helps you determine what products to suggest to a customer and how to best support the customer’s needs. 

The Growing Use Case of MPANs for Simplifying & Securing Payments

The introduction and general acceptance of MPANs symbolize a new era for recurring payments. 

One of the most notable advantages of MPANs is that they are not device-specific, meaning a user is not limited by their devices when making a payment. While device-specific tokens (DPANs) become invalid when a user upgrades to a new device — such as from an iPhone 14 to an iPhone 15 — MPANs are not tied to a particular device.

Unlike DPANs, MPANs are known as cloud tokens and are not issued directly by Apple; instead, these tokens are issued by the issuing banks themselves. 

MPANs are tied between a merchant, a cardholder, and an issuing bank, signifying the broader acceptance from traditional financial institutions of Apple Pay as a legitimate payment method. The partnership between Apple Pay and issuing banks to create MPANs shows a clear prioritization of Apple Pay as a trusted payment method for billing and subscription use cases. 

In addition to recurring payments, MPANs also present meaningful use cases for automatic reloads (such as for a loyalty card to a popular coffee chain) and deferred payments. 

In the case of deferred payments, the most common example lies in hospitality — for instance, if you book a cruise today but your payment is deferred until the date of the cruise. MPANs ensure any stored payment methods are updated and ready to use when the eventual payment date comes around. Such capabilities were not permitted on device-based tokens. 

However, DPANs have not entirely disappeared from relevance. The introduction of MPANs simply gives you greater flexibility when accepting payments. If a payment is a one-time transaction, a DPAN can still effectively do the job, while MPANs can be deployed for recurring payments. 

Enhancing the User Experience with Additional Metadata

With MPANs comes access to additional metadata that allows you to provide better end-user experiences.

Prior to MPANs, Apple Pay had limited data capabilities for keeping users updated on the status of a transaction. MPANs and the metadata they provide enable Apple Pay to send users custom notifications with descriptive billing details, known as a payment sheet. 

Before MPANs were introduced, Apple Pay could not display information in this way. In many cases, users could only see what was being processed in a singular transaction, rather than gaining a more comprehensive overview of even subscription payments.

Ultimately, MPANs aid in reducing cart abandonment by ironing out the inefficiencies in recurring payments and enabling users to select Apple Pay as their preferred payment method. These tokens can help boost conversion rates and are designed specifically to support billing and subscription-type payments, supported on the back-end by enhanced metadata. 

How MPANs Streamline Lifecycle Management Updates 

Lifecycle management updates — like card changes and expirations — need to be updated for stored payment data to stay evergreen. MPANs enable merchants to receive information on these lifecycle management updates, allowing Apple Pay to refresh stored payment methods as needed.  

This increased support for lifecycle management further shows that Apple Pay has evolved as a digital payment method. In today’s digitally-dominated payment space, Apple Pay is becoming a better-suited option for billing and subscription use cases, especially when it comes to lifecycle management. 

Moreover, since Apple introduced MPANs in collaboration with the major networks (Visa, MasterCard, Discover, and AmEx), we will continue to see more and more widespread acceptance of Apple Pay by traditional networks, issuing banks, and financial institutions. In turn, Apple Pay is sure to become a more integrated facet of the digital payment experience and payment lifecycle. 

Should You Offer Apple Pay for Your Recurring Payments?

As Apple Pay cements its place in the payments industry, it is important to consider how you can support changing customer payment preferences. 

Keeping your customers satisfied requires you to evolve with the times. MPANs are sure to result in more widespread use of Apple Pay for recurring payment use cases like billing and subscriptions, requiring merchants to determine the best strategy for handling and storing these tokens. 

Payment orchestration solutions provide key support for merchants working to adopt new payment methods and a more flexible overall payment system. 

At Spreedly, our payment orchestration platform can help you manage your tokens appropriately. Our advanced vaulting capabilities ensure cost efficiency and security, giving you peace of mind until your stored tokens are needed for a transaction. 

Get in touch with the Spreedly team today to learn more.

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