Will Apple Pay Really Help Jumpstart Mobile Payments?

Executives from Pizza Hut and other companies debate whether Apple Pay will be the force making mobile payments mainstream.
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Apple is late to mobile payments. Other companies have been doing it for years, though with varied levels of success. Many people hope Apple Pay, the iPhone-maker's new service, will be the catalyst needed to kick-start real consumer use of mobile payment systems. Not everyone is convinced it will, including executives at some of Apple's merchant partners who recently debated the issue.

"I am more pessimistic about Apple Pay’s impact than most people here,” said Danny Sullivan, VP of global digital experience at Pizza Hut, speaking recently at the Mobile Shopping Summit. “I had a call with Apple last week and right now it is only a payment system for apps. It is shut off from the mobile Web, which I think everyone knows is a bigger part of everyone's business from mobile devices. And, it is shut off from Android pretty much completely."

Sullivan's reservations are that Apple Pay is only a point-of-sale play. In other words, it can be used in stores and restaurants to make purchases, but it won't hook into other apps -- such as Pizza Hut's -- to power online transactions. What we don't yet know about Apple Pay, however, is if/how it will interact with Apple's Passbook application. Passbook is an app for managing and logging customer accounts and loyalty programs with various businesses. Many airlines, for example, integrate with Passbook for digital tickets.

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Simply replacing credit cards, argued Sullivan, isn't enough. "The use case still hasn’t been made," said Sullivan. "It has been talked about in the industry forever. I think what will make it inevitable is when credit card companies stop sending you plastic cards. That is not going to happen very soon. From a customer experience point, credit cards still work pretty well." There's certainly truth to that statement. Credit cards are small, transportable, and quick at the register. At launch, Apple Pay will be available at some 220,000 locations across the US. Many, many more locations accept credit cards.

Other speakers at the Mobile Shopping Summit disagreed with Sullivan. "My instinct is it is a game changer," said Brett Miller, VP of e-commerce at Calvin Klein. "This one is going to be the tipping point in the whole process just because there are 500 million iTunes account holders. I think it is going to remove a lot of friction [and] change the whole landscape of the payments processes and improve the conversion rates, particularly for retailers."

This is entirely possible. Android may be the dominant smartphone platform around the globe, but the US remains a stronghold for Apple. Consumers love the iPhone. For whatever reason, Apple Pay has piqued the iPhone-owning public's interest in ways that other mobile payment services have not. Google Wallet and Softcard (formerly Isis), for example, are widespread in their availability but hardly used by the masses.

Apple Pay is expected to launch this month. It will be enabled through a system update for the iPhone 6 and 6 Plus. Once activated, iPhone 6 and 6 Plus owners will be able to tap their devices on the payment terminals at various retailers around the country to purchase goods and services. As consumers see others making tap-and-go payments more frequently, the possibility of mass adoption surges.

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