Apple Pay

Will Apple Pay Prove To Be Payments’ Model T?

Henry Ford didn’t invent the car, the internal combustion engine or the wheel— those honors go to Karl Benz, Nikolaus Otto and Eugene Langen (or Eugenio Barsanti and Felice Matteucci) and an unknown early human who lived before the era of patents. And yet when asked about cars, in most places in the world the names that most people associate with the concept are “Henry Ford” and “Model T.”

Henry Ford didn’t have to invent the car to be famous for it, because as TSYS’s Associate Director of Global Innovation and Implementation Katherine McClure explained during PYMNTS Retail Reinvention Week’s Webinar on the future of the Mobile Wallet, Henry Ford did something almost as important.

“Henry Ford just figured out how to take the car to the masses – he didn’t create it,” she noted to a panel moderated by MPD CEO Karen Webster and filled out by Loop CEO Will Gralyin, LevelUp Chief Ninja Seth Priebatsch, Cortex MCP CEO Shaunt Sarkissian ; David Matthews, who is the Executive Vice President and General Counsel of the National Restaurant Association, as well as Doc Vaidhyanathan, VP Product Management, Digital Payments at CA Technologies .

Payments Model T Moment

From TSYS’ vantage point as the self-described “pit crew,” the mobile wallet is undergoing many “model T” moments right now.

And surely Monday’s (Oct. 20) launch of Apple Pay is a strong contender for just such a moment—when consumers are ready to give a horseless carriage a try, even though they had a perfectly good horse already at home.

There were a few roadblocks on day one. East Coast enthusiasts woke up ready to shop with Apple, only to find out that Apple wasn’t quite ready to shop with them—as the launch was geared to Pacific Time, not EST.

Twitter twittered with east cost discontent. Finally around 1 pm EST, the service launched.

“How will it change mobile payments? How has it already changed mobile payments?” Webster asked the Retail Reinvention panel while consumers waited for Apple.

“What Apple Pay does is bring legitimacy to the payments space,” Matthews told the panel. “Apple’s already been a transformative force in the music industry vertical, which indicates to consumers that a mobile payments solutions has arrived.”

Priebatsch from LevelUp concurred, noting “now the shift has to be taken seriously due to Apple’s track record of re-shaping industries.” He also noted that since the announcement, the biggest change he’s seen in his merchants is a more proactive desire to be able to accept it. However according to  Vaidhyanathan from CA Technologies, while everyone is focusing on what Apple Pay brings to the market, no one is  peeling the onion back to see the guts of what is really making up the Apple Pay System. ” Everyone knows Apple Pay was designed to drive NFC”, he noted.

Staying The Course

The great difficulty about launching a product is that it ceases to be a theoretically great idea and becomes a publically observable event. Amazon can attest to the fact that just because a lot of buzz is generated in the run-up to a release is no guarantee that anyone will actually buy it once its out there. The iPhone 6 sold more than 10 million models in its first weekend. Amazon’s Fire phone? Not so much.  

Luckily, Apple has a devoted fan base who were ready to rock when the product was released. Some of those devoted fans quickly learned that they were more ready than the banks that issued their payment card.

Customers of Bank of America, Chase and Citibank in some cases had to call or text their bank to authorize a card’s use with Apple Pay. While for Chase and Citi this only affected cards that were new (not already entered into iTunes), it did slow some folks down. The reason officially given to PYMNTS reporters when they questioned BoA Chase and Citi was that this was simply a security precaution on the front end because the issuers were about to give up some security control on the backend to Apple.

Although all bank representatives we spoke to had nothing but the utmost confidence in Apple’s security, they expressed a need to make sure all cards going in to the system for the first time yesterday were actually going into the phones of the people who owned them.

Others, according to Twitter, hit a will with certain types of cards. Holders of Amazon’s branded Visa card were particularly vociferous on social media about the problems they were enduring.

However as Apple Pay launches into day two, most the card acceptance problems are ironing out, as Katherine McClure explained is to be expected as Apple and its impressive (and impressively discounting) issuer base have every reason to cooperate and make things easy going forward.

“Digital engagement is good for banks, issuers want to be a bigger part of consumer’s lives and consumers are more attached to their mobile devices now more than ever.” She also noted that no one wants to be the issuer who doesn’t support Apple Pay.

“Apple Pay has a very particular tokenization scheme that it uses as part of this proposition”, noted Doc Vaidhyanathan. From CA’s perspective, we are leveraging the same standards and protocols that exist for any kind of payment that uses Apple Pay. The experience at the merchant does not change whether you use CA’s wallet or Apple Pay.”

The Road Ahead

While the greater minds in mobile were discussing a future without a physical wallet, one brave PYMNTS reporters was cast out of the office and told not to return until she had purchased something with Apple Pay on her new iPhone 6 Plus.

This employee had spent the morning being interrogated as to why she didn’t have Apple Pay on her phone yet, and then being asked every 22 seconds if the program was done downloading yet. She reported the download and installation took longer than she expected, but that it was not otherwise difficult, though she did have to call her bank.

Since being badgered is hungry works, she went to McDonalds.

“At first, going up to the clerk at McDonald’s knowing I was going to use Apple Pay was a bit nerve racking but when I placed my order and asked if I could use the Apple Pay service, it was extremely easy.”

That review, “easy,” may be the gold that Apple is look to strike if it really is going to ignite, a sentiment shared universally across the PYMNTS Retail Reinvention panel.

And that “easy” has to translate for both consumers and the merchants that are being asked to use it, notes Graylin.

“Merchants themselves don’t care about adding new tech until they see consumers caring. It’s about changing consumer’s behavior – from plastic to swipe, and then there needs to be a solution with utility and more capabilities.”

Graylin doesn’t see Apple as a competitor, even though they are both in the mobile wallet business, because he says their real competitor is plastic—a well ingrained, functioning and nearly universally available alternative to mobile payments.

“Consumers have a reliable way to pay – if you’re going to give them an Apple Pay solution with one percent of merchants, then it’s easier for them to stick with existing plastic.”

As Priebatsch noted, Apple Pay may be the Model T, but the merchants are the roads it has to travel down. And those are roads that time will tell if Apple can build.

The launch wasn’t perfect—it took less than an hour from the first availability of Apple Pay for the Twitter stream #ApplePay #Fail to emerge.

Webster, after the webinar, reported the service was easy to set up, but when she actually tried to buy something in a store, the actual physical mechanics of the system weren’t intuitive or really that good.

But Sarkissian said he is optimistic about Apple and the future of mobile payments in general.

“Apple is in position to get closer to the consumer and the transaction.” And mobile payments in general are crystalizing, according Sarkissian, and he expects the marketplace will only continue to do so over the next five years.

Five years will come up very quickly and the battle lines are being drawn. I think consumers are the ones who will benefit in the end.”

On day one, no one can know if Apple Pay is the model T of mobile payments. Plenty of things can still go right or wrong. But when Henry Ford brought the car to the masses, the masses had no idea what he was talking about. No one had a driver’s license, there were no highways and the explanation of “horseless carriage” just sounded like a description of a broken carriage. Today, people like driving so much, they changed the temperature of the planet by doing it.

Will Apple change the marketplace, and make the physical wallet a thing of the past? Don’t know yet, but PYMNTs will keep you posted as the story unfolds.

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Latest Insights: 

Our data and analytics team has developed a number of creative methodologies and frameworks that measure and benchmark the innovation that’s reshaping the payments and commerce ecosystem. The May 2019 AML/KYC Tracker, provides an in-depth examination of current efforts to stop money laundering, fight fraud and improve customer identity authentication in the financial services space.

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