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Apple And The Cordless, Cardless Consumer

The biggest news in Apple Pay this week came courtesy of PYMNTS at this year’s Innovation Project – with big news on both the adoption and innovation fronts.

On Day 1, IP delegates got a peek at the InfoScout/PYMNTS Apple Pay Transaction Tracker. That survey of over 1,000 potential Apple Pay user revealed that adoption is improving –  15 percent of potential users had at least tried the service as of the March 2015 report, as opposed to the <10 percent that had experimented as of a November 2014 InfoScout survey of potential Apple Pay users.  It also revealed that with 85 percent of potential users still totally uninitiated – mostly because they are either happy with what they are currently using or concerned about security – the new payments platform has a long way to go.

“Muscle memory is a challenge,” InfoScout Co-Founder and CEO Jared Schrieber told an audience at Innovation Project yesterday. “If I’m Apple, I’m dead-focused on point of sale and making sure there is a trigger to make sure I pull out my phone and not my card."

That same consumer survey also indicated, however, that those who do regularly use Apple Pay like the service, look for opportunities to use it and even make their retail decisions on the basis of it.

“Tired after long day at work and didn’t want to have to deal with bringing in purse and scanning cards, etc,” one survey participant noted.

For some users, Apple Pay is changing and improving an everyday experience – something Cupertino has specialized in for the better part of the last 30 years.  Perhaps then it should have come as no surprise that when the Pii360 Innovation rankings were released on Day 2 of IP, Apple topped the list.

What is the Pii360?

Though it will be covered more extensively elsewhere on PYMNTS, in short the Pii360 is the culmination of a nine-month effort on the part of the Market Platform Dynamics to rigorously measure innovation.  Evaluating over 100 companies across 10 segments, the Pii360 uses highly objective data-based methods to calibrate real and significant innovation across businesses, and segments, in payments. Through collaboration with academic experts on innovation, survey methodology, economics, R&D and patent valuations – the Pii360 creates and calibrates an index of innovation that is defensible, consistent and accurate.

“The No. 1 innovative company in payments is Apple, with a score of 826 out of 1,000” the Pii360 Executive Summary noted. “It got there because it has a tremendous payments patent portfolio, is viewed by those in payments as extraordinarily innovative, and has a number of other market and company indicators that reflect an excellence in payments innovations."

And when Apple Pay wasn’t being studied or ranked during IP, it was also being celebrated. Apple Pay took home two awards last night during the payments ecosystem’s answer to the Oscars – unsurprisingly in the category of Most Innovative and Biggest Catalyst.

But while they were talking Apple Pay at Harvard this week, the wider world was also talking about Apple – albeit about a different innovation. Apple, it seems, is going into the cable business. After what seems like years of reports of the possibility of an “a la carte” cable delivered via a digital stream over the Web – and even some early services offering a variation on it – Apple seems once again poised to be the big fish entering the developing pond, and changing its direction.

If the quotes about cable by Apple from this week sound familiar to payments players that’s not surprising – in many ways the launches resemble each other. And perhaps that too makes sense – Apple is building and expanding a digital ecosystem for the next generation of consumers – consumers that are perhaps as ready to be both “cordless” and “cardless."

Apple Cable – Another New Old Thing

So how is Apple going to disrupt cable?  So far it looks like it is going to do so with a few channels and a low price.

According to widely published reports earlier this week, Apple is currently in talks with programmers to put out a trim – about 25 channel – cable bundle – that is projected to cost around $30 per month. So far known broadcasters that will be included as part of that package are ABC, CBS and Fox, among the major networks. The service would then run on all devices powered by Apple’s iOS operating system, including iPhones, iPads and Apple TV set-top boxes.

“Apple is a strong brand and does things beautifully. Their No. 1 goal is to sell devices, not to be a big player in video, and so they don’t expect to make a big profit in this service,” said Deana Myers , an analyst at SNL Kagan.

Enthusiasm aside, Apple enters the cable space with some challenges that should seem familiar to payments players.

For example, Apple has tried and failed at cable before because to make the plan work, they essentially need to ride other (massive) players’ rails. Apple’s cable, after all, will be delivered by Web stream – but most consumers who buy high-speed Internet purchase it from a company like Comcast, Time Warner or Verizon – all of whom will be direct competitors of Apple’s since they sell traditional cable packages.

Now as Apple enlisted potential competitors at the card networks and banks – there are signs they could also enlist potential rivals in cable. Time Warner – the nation’s second biggest cable provider – had already collaborated with Apple on streaming HBO Go, unbundled from traditional cable.

Unfortunately, just as the nation’s largest retailer – Walmart – isn’t interested in getting involved with Apple Pay;  the nation’s largest cable provider is not interested in playing ball with Apple either. Comcast is the only broadcaster not in talks with Apple, discussion between the two mega-entities broke down last year, and Comcast decided to focus instead on its own streaming program. This could mean that Apple Cable would not include NBC, MSNBC, AMC or USA and any other networks owned by NBCUniversal, which is in turn, owned by Comcast.

The Cordless Cardless Consumer And The Digital Ecosystem

“Apple wants to transform the entire TV experience, and this would be one piece of the puzzle,” Brian White said. “We expect a full-blown new Apple TV that pulls on the company’s entire ecosystem."

It all seems to come back to ecosystem for Apple, and who is going to be existing in it. The cordless consumer – who wants their cable minus the expensive bundle and hardwiring- and the cardless consumer – who would rather reach for their phone than their wallet- are demographically similar.  Both groups are young – the vast majority of both cordless and cardless consumers are under the age of 43, with more users in the 18-29 bracket than the 30-43. Both groups are statistically more likely to be single, are fairly evenly distributed between men and women and are slightly more affluent than the American average.

What the cordless and cardless consumers are both representations of is the digital consumer whose commerce ecosystem – whether it be for goods, services or media is increasingly shifting online and going mobile.

Apple – be it through Apple Pay or Apple Cable – is increasingly becoming a touchstone business in that digital economy –  providing now the hardware for access, various digital goods and even the means to pay for all of it.

Apple Pay is still building up users, as as the PYMNTS/InfoScout study demonstrates, that will not be an instant process and it is not impossible to imagine that it might face similar challenges trying to disrupt cable.

But Apple is the most innovative player in the payments space, according to both the rigorously researched Pii360 study and the payments players who voted for the awards granted at IP last night. That is no small feat, especially considering that payments isn’t even their main business. It’s probably not wise to put too much past them.

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Latest Insights: 

The Payments 2022 Study: Building A High-Performance Payments Team For Fraud Detection, a PYMNTS collaboration with Stripe, examines how digital platforms of all sectors and sizes plan to develop their anti-fraud teams as part of their their broader growth and development strategies. Drawing from an extensive survey from approximately 250 payments heads at digital platforms in the U.S. and abroad, our study analyzes how poor anti-fraud capabilities can harm platforms’ long-term growth strategies, and how they can build high-performing teams to tackle these challenges.

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