September 15, 2015

Apple Pay, Android Pay, Samsung Pay, CurrentC Hoping to Incentivize People to Switch from Cash and Credit Cards to Mobile Payments

Apple Pay, One Year Later: Still Waiting to Catch On

September 7, 2015

 Ian Paul - One year ago, Apple introduced its long-expected mobile payment system, Apple Pay. The new payments platform lets iPhone 6, iPhone 6 Plus, and Apple Watch users pay for items at retail locations throughout the United States and the United Kingdom. Instead of swiping a card with a magnetic stripe at checkout, they can just tap their Apple Pay-compatible iOS device on a compatible terminal, and the transaction is done, the payment made from their selected credit or debit account.

Of course, the company would like Apple Pay to be the way we all buy everything at retail outlets in the future. But how many people have actually made that switch already? What can Apple do to convince others to do the same? And how will Apple Pay fare as new competitors come on line? In other words, one year later, how’s Apple Pay doing?

How it’s doing: Merchants

Twelve months after its announcement, Apple Pay’s early statistics appear promising. In the U.S., Apple expects the payments platform to be available at 1.5 million merchant locations by the end of 2015. In the U.K., Apple Pay was available at 250,000 locations when it launched there in July. Those numbers include major American retailers such as Macy’s, McDonald’s, Staples, and Walgreens, as well as big names in the U.K. such as Boots, H&M, and Vodafone.

On top of those merchants, Apple has nearly 450 U.S. banks signed up to support Apple Pay, including credit card provider American Express. In the U.K., nine banks now support Apple Pay. Payment start-up Square — which sells that small dongle that converts smartphones and tablets into digital cash registers — will also support Apple Pay with a new piece of hardware this fall.

How it’s doing:  Users

So Apple Pay is certainly out there. But, says Sucharita Mulpuru, a Forrester principal analyst who specializes in eCommerce and consumer behavior, “Regardless of how many companies accept it, what really matters is how many consumers are using it.”

In January, company CEO Tim Cook suggested — without providing much in the way of specifics — that adoption of Apple Pay was strong. “Apple Pay makes up more than two out of every three dollars spent on contactless payments across three major U.S. card networks,” Cook said during Apple’s Q1 2015 earnings call.

Sounds good, except that contactless payments including Apple Pay still represent just a fraction of all retail transactions. That, in turn, is partly due to the fact that Apple Pay for retail is only available to a relatively small group of users who own the latest iPhones or an Apple Watch. Apple being Apple, it doesn’t break down iPhone sales numbers by specific model, and it hasn’t provided any figures on Apple Watch sales yet. So it’s impossible to say how many people are even equipped to use Apple Pay in the first place.


Sources outside of Apple aren’t much help, either. Consumer surveys from PYMNTS.com and InfoScout say Apple Pay adoption is relatively stagnant, while a recent survey from Auriemma Consulting Group suggests Apple Pay usage is growing. Regardless, it’s clear that Apple Pay still provides just a tiny sliver of daily retail transactions.

(Apple did not respond to our requests for comment on this story.)

Changing habits, changing minds


Growing that sliver may require Apple to give people better reasons to use the payments platform. “There’s nothing fundamentally better that a digital wallet offers than your incumbent payment solution,” Mulpuru says — meaning there’s currently little difference between pulling your phone or a plastic card from your pocket. An Apple Watch on your wrist may be more convenient — but, again, we don’t yet know how many people can do that. We do know that Apple Pay-capable iPhones vastly outsell their smartwatch counterparts.

The fact remains that you can pay with a card nearly anywhere, which is not yet the case with Apple Pay or any other tap-based mobile payment system.

The key for Apple Pay or any mobile payment system to grow, Mulpuru says, is to offer consumers some incentive to change. This fall, Apple may take a step in that direction by introducing support for loyalty cards as part of iOS 9. In that case, if you were to use Apple Pay at a retailer such as Walgreens, Dunkin’ Donuts, or BJ’s Wholesale Club, your purchase would count towards those companies’ rewards programs. That would be a nice perk —  but it would still be a case of replacing one solution with another, while adding little value. It still wouldn’t give Apple Pay any major advantage over plastic cards.

Apple Pay is not alone

The challenge of getting more people to pay with their phones isn’t just a problem for Apple. There are a whole host of mobile payment solutions slated to show up in the coming months.

Most notably Google, which will jump-start its failed first attempt (Google Wallet) with Android Pay. Google Wallet first came out in 2011, but failed to catch on, due to disinterest from merchants and active competition from mobile phone carriers and their Softcard program. Also, Google Wallet wasn’t as simple as swiping a card or tapping an iPhone 6 while holding down the fingerprint reader, as you do with Apple Pay.

Android Pay should ameliorate that situation when it rolls out this fall with a simpler, one-touch, Apple Pay-like experience. Android Pay will be compatible with phones running Android 4.4 and above. On September 28, Samsung will introduce Samsung Pay, an exclusive service available on select Samsung Galaxy phones.



Another solution called CurrentC is also under development from a consortium of large retailers such as Best Buy, Target, and Walmart. CurrentC was expected to roll out this year, but a recent report by Re/Code suggests we won’t see it until 2016.

Prospects for CurrentC, however, do not look good. Many retailers behind the effort are already supporting alternatives — including Apple Pay. Plus, CurrentC will require users to download an app, whereas the other three options come pre-installed on carrier-sold devices making it far easier for shoppers to adopt.

Even with all these new mobile payment services, it’s still an open question whether people will regularly turn to their phones for purchases instead of plastic cards. Apple and the others need long-term strategies to address the ubiquity of credit cards and the lack of incentives to change our purchasing behaviors.

Otherwise, our phones (or watches) may never replace the physical wallets sitting in our purses and pockets.

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