IoT
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Mobile // Mobile Business
Commentary
5/8/2015
12:05 PM
Eric Zeman
Eric Zeman
Commentary
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Apple Pay: Quiet Success Or Murky Failure?

Crunching the numbers suggests adoption of Apple Pay is anything but booming and points to real problems facing the mobile payment industry.

Apple Watch: My In-Store Demo
Apple Watch: My In-Store Demo
(Click image for larger view and slideshow.)

Is Apple Pay a success, or is Apple Pay a failure? The answer depends on who you ask, but looking at some raw data sheds a bit of light on the subject. One estimate says the number of regular users may be somewhere south of 2 million.

Apple Pay arrived on Oct. 20. It is compatible with only the iPhone 6 and 6 Plus handsets, and also the new Apple Watch. The service launched with support from a handful of banks and retailers, with compatible terminals at about 220,000 locations. Since then, support has grown significantly. The number of banks supporting Apple Pay has jumped to more than 100. Apple says the number of retail locations has surpassed 700,000.

In November 2014, barely a month after launch, retailers reported a spike in mobile payment use. McDonald's said Apple Pay accounted for 50% of its tap-to-pay transactions between Oct. 20 and Nov. 17. Softcard, a competing service, reported a huge increase in interest following Apple Pay's debut. Seeing others use phones to make payments sparked general consumer interest. Big names like JetBlue and Home Depot are looking at Apple Pay. Samsung cooked up its own competing service called Samsung Pay.

These are all positive signs pointing towards a successful launch for Apple Pay, but the numbers don't quite add up according to PYMNTS.com.

Earlier this week, Kantar Worldpanel ComTech reported 18% of iPhones in the US are the iPhone 6 or iPhone 6 Plus (remember, these are the only iPhones that offer Apple Pay). Comscore says the total number of iPhones in the US stands at about 80 million. That means the highest possible number of potential Apple Pay users is about 14.4 million.

Only 15% of iPhone 6 users have actually tried Apple Pay at least once, according to research compiled by PYMNTS.com. That drops the number of Apple Pay users down to a maximum of 2.16 million.

Of the 2.16 million who've tried Apple Pay at least once, 85% say they use it every time they can or every time they remember.

There are two problems with that equation: Apple Pay isn't accepted at all that many places yet, and even where it is accepted consumers need to remember to actually pull out their phone, instead of their credit card. In other words, PYMNTS.com says about 1.8 million people do their best to use Apple Pay every chance they can.

[Read about NFC going mainstream.]

The actual number of regular Apple Pay users, however, is anyone's guess.

What's important to remember here is that changing consumer behavior takes time. The US buying public has been using credit cards for decades. They're fast, they're easy, and, most important, they're routine. It's going to take a long time before using mobile phones to pay for goods and services becomes routine.

Samsung has great potential with its forthcoming Samsung Pay feature. Since it uses both magnetic and NFC technology, Samsung Pay can be accepted at the vast bulk of retail locations. If Samsung sells a lot of Galaxy S6 and S6 Edge smartphones, and if a significant portion of those people sign up for and use Samsung Pay regularly, mobile payments as a whole stand a greater chance of becoming mainstream.

Hopefully Google will play a greater role here, too.

The company purchased Softcard's mobile payment assets from AT&T, T-Mobile, and Verizon Wireless and plans to incorporate them into its own Google Wallet product. With any luck, Google will have news to share during its developer conference slated for the end of May.

[Did you miss any of the InformationWeek Conference in Las Vegas last month? Don't worry: We have you covered. Check out what our speakers had to say and see tweets from the show. Let's keep the conversation going.]

Eric is a freelance writer for InformationWeek specializing in mobile technologies. View Full Bio
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kstaron
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kstaron,
User Rank: Ninja
5/22/2015 | 6:02:09 PM
McDonald's Apple
Looks like Apple Pay has a promising start. However one thing in the article made me chuckle:

McDonald's said Apple Pay accounted for 50% of its tap-to-pay transactions ...

So does that mean, once you shell out for an Iphone you can only afford McD's? I somehow never imagine someone spending that much on a phone then going to a fast food chain with a dollar menu.

ChristopherA465
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ChristopherA465,
User Rank: Apprentice
5/12/2015 | 8:51:44 AM
Apple Watch
PYMNTS.COM did throw out a lot of good numbers, but there is not much insight within the article concerning Apple Watch.  It's also worth noting that the possible Apple Watch adopion rate was never mentioned.  

 

Most analysts are predicting 10-15 Million Apple Watch sales, and possibly more, in 2015.  It's safe to say that for many of those customers, Apple Pay will be one of the most prominent features on Apple Watch.  I believe that the upside of the number of regular Apple Pay users could be 10 - 30 Million between now and 2017, based on Apple Watch adoption, as well.

 

 
Philip
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Philip,
User Rank: Apprentice
5/11/2015 | 12:45:54 PM
Make it an Open Standard
I think what will finally make Pay-by-phone systems take off is to standardize it. The article mentions Samsung Pay and Google Softcard, two more proprietary systems that compete with Apple Pay. Samsung only works with Samsung phones (of course), and Softcard was originally working with Windows Phone, and they even had a development partnership to enable mobile payments with Apple right before Apply Pay was announced (both of which are shut down after Google bought Softcard). If Apple were to stop calling it "Apple Pay" and instead call it something generic, and at the same time, open it up to all players, then hopefully all the competing standards can converge and allow Pay-by-phone to really take off.
soozyg
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soozyg,
User Rank: Ninja
5/10/2015 | 8:33:20 PM
PayPal
I'm surprised PayPal isn't more heavily it the mix or at least presented some kind of competition to Apple Pay in public. Or maybe they have, it just seems like whenever someone mentions Apple Pay, PayPal does not come up. Does the PayPal app not offer the same convenciences as Apple Pay? I haven't paid much attention to Apple Pay because I use an Android.
mejiac
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mejiac,
User Rank: Ninja
5/9/2015 | 6:19:06 PM
Re: Apple Pay use limited primarily by merchants
@Pedro Gonzalez,

Thank you for your comment,

As mentioned in the article, "It's going to take a long time before using mobile phones to pay for goods and services becomes routine."

I think once the platform becomes more standard, and vendors accross the board start providing it to merchants for mass acceptance, things will start to change.

Many small companies love services that utilize there phones to accept payments. So if the avability is there to also use your smatphone to also accept Apple Pay will bring a greater adoption rate.
mejiac
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mejiac,
User Rank: Ninja
5/9/2015 | 6:15:05 PM
Re: Apple Pay use limited primarily by merchants
@byundt,

Thank you very much for your comment, very insightful.

I think the strategy you adopted of having your family utilize Iphone 6 as a payment method is pretty sound (in fact, I think I would have done the same if my kids weren't small still)

As mentioned in the article, changing consumer behavior takes time. When Apple launched the first Ipad, even though it was a boom, it was at least a year or two when the competition started to see that it was a very profitable market, and that when things started to pick up at an accelarated rate.

I have no doubt that mobile payments in the coming years will become the norm. An today there are many inbetween services, such as those devices that attach to smartphones to accept credit cards. So the trend is there, it's a matter of picking up some traction
jastroff
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jastroff,
User Rank: Ninja
5/9/2015 | 5:37:36 PM
Re: Apple Pay use limited primarily by merchants
>> The actual number of regular Apple Pay users, however, is anyone's guess. What's important to remember here is that changing consumer behavior takes time. 

Well said! But it's a really crowded space (payments), and so success might take some time.

It's interesting to note that people under a certain age/income can't get credit cards, hence the attractiveness of mobile payment systems such as Apple Pay and others. Disruptive to Mastercard/Visa/Amex, etc.
PedroGonzales
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50%
PedroGonzales,
User Rank: Ninja
5/9/2015 | 10:00:07 AM
Re: Apple Pay use limited primarily by merchants
I agree that it will take a long time for people to get use to apple pay.  I know for people, who use it, they love it.  it is the best thing in the world.  I think for partnerships and may be some workshops were apple introduces how to use and an excellent marketing campaing will allow people to know the benefits of using this form of payment than other most comment.  I know for a fact that there are people that prefer to stick to credit card and cash. 
byundt
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byundt,
User Rank: Apprentice
5/8/2015 | 9:18:08 PM
Apple Pay use limited primarily by merchants
Target, Home Depot and other large merchants have been victimized by a number of recent high profile data loss incidents. These merchants have proven that they cannot be trusted with my personal and banking information.

Because it offers better security, I strongly prefer to use Apple Pay whenever possible. I therefore purchased iPhone 6 phones for my family specifically to use with Apple Pay.

The limiting factor appears to be the merchants who will accept Apple Pay. I support those who do, and have changed which stores I shop at and which charge cards I use. In many shopping categories, however, there are no stores in my shopping area that accept Apple Pay.

Things should get better by October 2015 when Visa and MasterCard shift liability for fraud losses from bank to merchant if they don't support chip-embedded credit cards. Because new charge card terminals are required, holdout merchants will get NFC functionality at the same time--and Apple Pay acceptance should boom.
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