Apple Pay: A few surprises – or are they really surprises?

Apple Pay: A few surprises – or are they really surprises?
Apple Pay continues to provide excitement to many in the industry who are looking for signals indicating that Apple Pay is either doomed or is becoming a mass-scale success. In reality, it’s neither at the moment – it’s still early days. A few recent stories also caught my eye. At first glance, they seemed a little surprising, although I don’t think they should be. The first was the InfoScout blog discussing their research that 90.9% of iPhone 6/ 6+ users have never tried Apple Pay, and only 4.6% of those who could use Apple Pay during Black Friday, actually did, which has prompted some commentators to announce the death of Apple Pay. Considering that smooth consumer payment experience is one of the major Apple Pay’s attractions, low usage might appear a little surprising. However, if you think about the shortage of merchant locations, lack of awareness which merchants would accept the transactions, general stress of shopping on Black Friday and the fact that we are talking here about “normal” consumers (albeit early iPhone 6 adopters), not payment geeks, it starts to make more sense. Various other surveys found that consumers who have used Apple Pay, compared it highly favourably to using a traditional plastic card. And according to the same InfoScout blog, of those who have not used Apple Pay, 31% said they didn’t know if the store accepted it and 25% said they simply forgot – factors that will fall away over time with more training, communication and experience. Bank of America recently said that 800,000 of its customers have signed up with a total of 1.1 million accounts. The second was a recent story in Digital Transactions that there are now 54 banks and credit unions supporting Apple Pay. Only 54? Didn’t the announcement from Apple in October state that it signed up another 500 FIs in addition to its launch partners? Well, there is clearly a difference between signing the paper and actually supporting customers and their cards from technical and operational perspective. Still, it is encouraging to see that the number of institutions continues to grow and includes issuers across the spectrum, from the largest banks to small(-ish) credit unions. My final surprise was data from research that ACI Worldwide conducted at a recent National Retail Federation (NRF) show. ACI surveyed 200 participants, 85% of whom were based in the US and over half represented merchants. 47% of respondents expected that Apple Pay would “win the mobile wallet war” with Google and PayPal being other main contenders; only 6% opted for MCX. In our last year’s report assessing Apple Pay’s prospects, we predicted that the US merchants would be the most likely major barrier for Apple Pay’s success. However, if merchants start to believe in Apple Pay, they might start switching on the contactless capability on the new terminals they are installing as part of EMV migration. And if that happens, then mobile payments might arrive sooner than even the most optimistic of us expected.
Zilvinas Bareisis About Zilvinas Bareisis

Zilvinas Bareisis is a senior analyst with Celent's Banking practice. His research focuses on retail payments, including cards, e-commerce, and mobile payments. He has a global perspective with a particular emphasis on market developments in North America, the UK, and Europe.

Comments

  1. Luca Gagliardi says:

    I want to share with you my experience with Apple Pay so far.
    There are 2 months I have been using Apple Pay and I have my Visa debit card issued by Chase registered.

    I usually try to pay with Apple Pay when I see NFC terminals here in NY, not so common compared to London. NFC terminals are provided mainly by major chains (Whole Foods, Duane Reade, CVS, Home Depot etc) but I haven’t found bars with NFC yet like in London.
    Whole Foods, an organic supermarket chain where I go every day, is the only one exposing Apple Pay logo at the cash register and promoting Apply Pay with some advertising, other chains just have the generic contactless logo.

    I have never had problem to pay with Apple Pay at Whole Foods but I have been usually rejected from other chains and I had to swipe my card. In term of experience I have been always required to insert my PIN, this may be due because my lack of credit history in the US or because my card is not contactless (Cashier at Chase told me they don’t issues c-less because the risk of phising is too high(?))

    However, using Apple Pay inserting the PIN is slower than swipe a card and go
    More curious when queuing at Whole Foods I look at how other people pay and I haven’t generally noticed others pay with the mobile, but lots of people with an Iphone 6 in their hands.

    Regarding other payments options, pay with PayPal in store is really impossible because the acceptance in Manhattan like in Central London is too limited yet, there are some places but only reason to go there is because you want to use PayPal and not because you are shopping. Instead Venmo (P2P payments through online banking) seems gaining traction

    This is my experience so far, it seems digital payments in store is something you can’t see yet when shopping. However Amex and MC have started last week promoting Apple Pay through TV advertising so the adoption may accellerate soon

    • Zilvinas Bareisis Zilvinas Bareisis says:

      Luca – thank you very much for sharing your experiences. It sounds like there is still a long way to go before mobile payments (Apple Pay or others) become commonplace. It also shows the importance of even the smallest details – it’s easy to destroy the user experience if the banks do not adapt their standard practices to the specific solutions, for example, by continuing to ask for a PIN for Apple Pay, even though arguably, biometric authentication is a stronger CVM than a PIN.

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  1. […] banks and credit unions have signed up with Apple Pay. Of course, as we discussed in our earlier blog, the number of FIs actually already supporting Apple Pay is much smaller – 54, but the […]

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