Why Apple Pay’s Slow Start Doesn’t Mean It’s a Failure

applepay

From my opinion piece in MIT Technology Review:

A year after Apple Pay was announced, the mobile wallet built into the iPhone doesn’t look as if it will “forever change the way all of us buy things,” as Apple CEO Tim Cook said it would.

Only 13 percent of people with phones that can use Apple Pay have tried it, according to a June survey by consumer research firm InfoScout and the payments industry site PYMNTS.com. The survey also found that only a third of iPhone 6 consumers who were in a store that takes Apple Pay actually used it, down from almost half three months earlier. On top of that, Apple Pay still accounts for only 1 percent of physical store transactions in the U.S.—a “microscopic” amount, says David S. Evans, founder of payments consultant Market Platform Dynamics.

What happened?

Exactly what we should have expected, actually. It was never a secret to those close to the payments and retail businesses that usage of Apple Pay would be slow to build. … But it’s too early to write the post-mortem on Apple Pay. In the space of a year, Apple has managed to make more headway than any other mobile wallet contender has to date. And several developments suggest that in the next couple of years, Tim Cook might be proved right after all. …

Read the rest of the piece.

Apple Pay Has Finally Arrived! Great – But Here Are 7 Reasons It Won’t Be A Slam-Dunk Success

applepay

From my Forbes blog:

Judging from most of the coverage of  Apple Pay, the mobile wallet that launches Monday, you’d think Apple has already revolutionized the $4 trillion U.S. payments market before anyone has even used it in the wild.

It does look pretty slick, at least based on Apple’s own demonstration at the Sept. 9 event where it also debuted two iPhone 6 models and the Apple Watch. All that’s required to buy a burger and fries at McDonald’s or a tank of gas at Chevron, Apple CEO Tim Cook promised, is to hold an iPhone near a wireless reader at the checkout counter and press a thumb on the home button to activate Apple’s Touch ID fingerprint sensor. In under 10 seconds, you’re out the door.

That would be a stark contrast to today, when using a mobile wallet from Google, PayPal, and others requires unlocking a phone, typing in a number, checking into a store, and various other steps–including waiting to see if it even works and trying another time or two when it doesn’t. Many merchants don’t even have checkout people who can tell you how it works. In several attempts in the past week or so, I went two for four: Google Wallet worked at Peet’s and Walgreen’s, though only after a couple of attempts, PayPal didn’t work at a local cafe where it was supposed to, and CVS didn’t work with either one. Even the clerk there didn’t know how the reader at the checkout counter worked.

But based on research into rival wallets and interviews with merchants, payment tech firms, and payments experts, it’s apparent that Apple Pay is far from a guaranteed success–at least if you judge success on what Apple CEO Tim Cook promised last month: “Apple Pay will forever change the way all of us buy things.” Here’s why there’s good reason to view Apple Pay with skepticism:

* You can’t use Apple Pay unless you buy an iPhone 6 or 6 Plus. Apple uses a method to send data from a phone to a checkout reader called Near Field Communication, which is used in some 220,000 retail locations already for other wallets and new credit cards that use a chip to store information. Previous iPhone models didn’t have NFC, so you can’t use them (except for iPhone 5 models along with an Apple Watch, but not until next year). So not only is Apple Pay limited to iPhone users, it’s limited only to iPhone 6 buyers, who number at least 10 million so far and perhaps double that by the end of December.

That may well be enough to jumpstart Apple Pay usage and finally make the long-awaited mobile wallet a reality–for iPhone users. But no store will want to turn away users of Android or other phones who see the iPhone owner in front of them in line whisk through with a tap. “Merchants won’t want the PR hit of discriminating against Android users,” says Richard Crone, CEO of payments advisory firm Crone Consulting, who notes that there have been 50 million downloads of branded merchant apps and 90 million active banking app installs. “This will cause them to get religion quick around their own mobile wallet.”

* Cash and credit cards just aren’t that hard to use. Everyone takes cash, and most places of any size accept credit cards. Credit cards also survive getting wet or hot or sat on much better than phones. As payments expert Bill Maurer, dean of the School of Social Sciences at the University of California at Irvine, said in my Apple Pay story, “All of these mobile wallets are looking for a problem to solve.” …

Read on for more challenges facing Apple Pay.