Will Apple Pay Really Help Jumpstart Mobile Payments? - InformationWeek

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10/8/2014
11:00 AM
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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.

[Apple fans aren't upgrading quickly. See iOS 8 Adoption Rate Trails iOS 7.]

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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Eric is a freelance writer for InformationWeek specializing in mobile technologies. View Full Bio

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melgross
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melgross,
User Rank: Ninja
10/12/2014 | 6:24:14 PM
Re: i hope not
No, it is not. In fact, the credit card companies and the banks are willing to give Apple a slightly higher fee because of the increased security. You really need to read about how this works.
Stephane Parent
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Stephane Parent,
User Rank: Moderator
10/9/2014 | 10:12:08 PM
Waiting...
This 6 plus consumer is looking forward to trying out Apple Pay. Here in Canada, we've been using PINs, then tapping to pay with credit cards. Removing the plastic seems a good deal.
PedroGonzales
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PedroGonzales,
User Rank: Ninja
10/9/2014 | 8:25:31 PM
Re: The premium feel.
I think Apple going into mobile payments is very positive.  It adds a new approach to the way payments are made.  I agree that credit cards won't go away any time soon.  They are very convenient and people are very use to them.  I think apple pay would sure captive a niche group of people, but there will continue to be a gap to break it for the general population.
tzubair
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tzubair,
User Rank: Ninja
10/9/2014 | 1:36:42 AM
The premium feel.
I foresee Apple Pay to have a good future. Apple is again, taking lead in offering to its customers a unique facility that other mobile companies have not touched upon. It adds to the 'premium' feeling associated with owning Apple Products. Lets see how good it is.
ErikS163
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ErikS163,
User Rank: Apprentice
10/8/2014 | 5:52:01 PM
i hope not
touchid is flawed security.  very suspicious of electronic payments too.  plus physical credit cards are easy enough why try to fix what's not broken?
melgross
IW Pick
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melgross,
User Rank: Ninja
10/8/2014 | 2:21:42 PM
Re: Apple Pay will benefit from marketing
Google Wallet has been failing for a number of reasons. One is that it's clumsy. You need to open the phone, then type in a PIN, or password. Then you have to open, and perhaps first find, the payment app. Then you again need to type in a PIn or password. Then you have to close the app, then close the phone. That's even more work than using a credit card, particularly since many places don't even require you to sign if it's below a certain amount. Secondly, unlike Apple, Google hasn't made agreements with credit card companies and banks. That leads to problems in the payment route, which I'll discuss below And here it is: The third, and major reason is that every purchase, every location you buy at, the amounts you've spent, and whatever else goes through that transaction, including which credit card you've used, must go through Google's servers. Google's servers? Really? Do we want all of this additional information about everything we buy to sit forever on Google's servers? Because we know that whatever Google may say about it, that's exactly what will happen. This is the ultimate advertisers dream! To know every single purchase we've ever made, and where, how, why and when. And for those who actually don't know, Google is an advertising agency, according to their own financial reports about 96% of their sales and profits are from advertising. Every service they have, every piece of software, is designed to collect our data.
melgross
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melgross,
User Rank: Ninja
10/8/2014 | 2:13:46 PM
Correction needed.
The number is 220,000 locations, not 22,000. Thanks for making the correction.
mejiac
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mejiac,
User Rank: Ninja
10/8/2014 | 1:25:36 PM
Re: Apple Pay will benefit from marketing
@Sharen,

I share your sentiment, I do strongly believe that Apple will be able to take mobile placement to where it needs to be, at a level that's adopted accross the board, and Apple does have both the resources and execution expertise to do this well.

A comment: you are right that Iphone users spend more on Apple's app store/Itunes than on Google and it's related stores (like Samsung has there own store), which is why Apple Pay seems like the next step in taking things forward, since it's simply leveraging what's already there (a slew of already registered users)

There's a pharmacy store near where I live that does have Google Wallet available, yet they don't even mention it since the adoption rate has been very very slim.
MichaelD698
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MichaelD698,
User Rank: Apprentice
10/8/2014 | 1:21:16 PM
Need something more compelling than tap and pay
Tap and pay is not any more convenient than pulling out a card and swiping.  Especially when you are talking about standard cards like Visa, MC, etc.  If we get to a point where we enable some sort of proximity technology where the payment terminal just KNOWS it is you, then I think we'll see some sort of fundamental shift.  I already watch soccer moms struggle pulling up their Groupons on their phone at the counter.  I'm not looking forwarding to standing behind them in line watching the fumbling with their phones, scanning their thumbs and trying to pay.   Frictionless is exactly that... paying has to be such that your action should be nearly zero.  One-Click is an example on the web where payment is so simple that you can accidentally purchase something.  I don't think ApplePay v1.0 gets us there.
Shane M. O'Neill
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Shane M. O'Neill,
User Rank: Author
10/8/2014 | 1:10:09 PM
Apple Pay will benefit from marketing
Apple Pay will succeed where Google Wallet and Softcard have not because of marketing. iPhone users know about it, and iPhone users buy more stuff than Android users (this is an educated guess, I don't have data handy). Google Wallet fell by the wayside. People are either unaware that it exists or don't trust it and Google made no effort to promote it. For mobile payments, it seems more trustworthy to use the brand's app (i.e. Starbucks) or stick with a credit card.
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