There is an old adage that says “March goes in like a lion but goes out like a lamb,” that one could conceivably imagine the staff at Apple trying to re-engineer these days.
“March comes in like a hungry lion and goes out like a lion sated on apples,” would make a likely candidate given the various twists and turns the third month of 2015 has thrown at Apple.
The biggest headlines last month were about a security breach – albeit one that wasn’t technically Apple’s fault. While Apple’s biometric/tokenized security package remained inviolate, fraudsters figures out a low tech way to exploit Apple Pay – provisioning stolen card numbers into faked Apple Pay accounts. While using stolen card numbers is not new, using Apple’s security bona fides to essentially turn card not present fraud into “card present” fraud at physical retailers was just further proof that where there’s a will, there’s a way for the cybercrooks to work their magic.
Next up was InfoScout’s updated numbers about Apple Pay adoption among consumers for in-store purchases. On the upside, the numbers showed improvement over the previous survey that reported that fewer than 10 percent of potential Apple Pay users had ever even attempted to use the service. Improvement and ignition are not the same thing, and with 85 percent of potential Apple Pay users having never tried to pay in store with it – it is almost impossible to make a case that Apple Pay is blowing up – in the positive sense – at physical stores anyway.
And then as March’s parting gift to Apple, the last day of the month saw the release of a new report by Phoenix Marketing International that indicates yet more problems for Apple Pay – also at the physical point of sale.
The study found that while one out of every nine credit-card owning U.S. households has signed up for Apple Pay, two-thirds of those adopters have run into trouble using Apple’s mobile payments system in stores. As a result, almost half have used it only once.
As is often the case with reports on Apple’s emerging mobile payment system – the news is not all bad, if nothing else it indicates there is strong interest in giving the new mobile payments platform a try. But if conventional wisdom is right, mobile payments’ greatest promise is making commerce maximally frictionless.
PMI’s report indicates that currently Apple Pay is not making the target for the majority of its potential users. In fact, it may be making the experience worse.
What They Said The Users Said
The survey of 3,000 payment card users by Phoenix Marketing International found that 66 percent of iPhone 6 owners had signed up for Apple Pay in the first four months, and 88 percent of those people had used Apple Pay to make an in-store or in-app purchase.
The waters get a little muddy here since that 88 percent figure also includes in-app purchases. Comparing in-app to in-store is a bit like comparing bananas to brussels sprouts – both are edible, but it’s not likely that you’ll be serving bananas as an accompaniment to the rib eye steak you might be eating tonight. Our data show that 85 percent of those people had not even tried even though they could. The in-app side shows very different results, however, with many more people trying and using it more consistently.
But back to the problems that PMI says the consumers they surveyed experienced.
Almost half — 47 percent — said they went to a retailer that was supposed to accept Apple Pay, only to learn that store didn’t actually accept Apple Pay yet. That, says PMI, is a turnoff for consumers who are eager to try but were turned away.
“Since Apple Pay is still in an introductory mode and the NFC acceptance network still has a long way to go, adding a continuously updated local-store directory to the Passbook app is a necessary short-term product improvement,” said Greg Weed, director of card research at Phoenix. “Posting a list of participating retailers on a website is not cutting it.”
Free advice to Apple from PMI.
But simply not being ready yet is only part of the challenge, they say.
For example, even in cases where the service did work, 67 percent said they encountered some kind of problem. Those problems included transactions that took longer than desired (48 percent) whatever that means, cashiers who were totally clueless about Apple Pay and who thus couldn’t help facilitate the transaction (42 percent), transactions posted incorrectly or charged twice (36 percent), payment terminals that didn’t work (27 percent), and the inconvenience of selecting a specific card at checkout (23 percent) (which is totally confusing to us since our data show that most people — as in 76 percent of them — only have one card in their Apple Pay wallets). One in seven complained that Apple Pay “just took awhile to get used to.”
All told, 48 percent of those who have tried Apple Pay haven’t used it a second time, and the average user has made only 2.6 in-store Apple Pay transactions since the system was launched.
Among those who used Apple Pay in-store, almost half used it inside an Apple Store. About one-third used it in a Macy’s store, and 36 percent used it at McDonald’s, Bloomberg News reported.
Apple’s Fault Vs. Apple’s Problem
It is hard to fault Apple for these issues, as it seems many of them are beyond Apple’s control. While adding “continuously updated local-store directory” in Passbook might work as a triage to prevent customers becoming annoyed, it does not address the underlying problem that the NFC network that Apple is reliant on is not quite as ready to roll as it needs to be to get ignition in any sort of meaningful time frame.
Moreover, the experience is slow and poorly facilitated in store – there is probably not much Apple can do – except maybe in Apple stores. And, as long as those two problems persist, there will be a third problem which our InfoScout data points out in spades: users don’t get into the habit of using it so forget to do it when they are in stores that accept it. That makes the payments platform “hard to get used to.”
The in-app part of the Apple Pay story, is another story altogether and for an entirely different reason: using an easy, one click payment solution on a mobile device eliminates friction all day long. And, in situations like online ordering, we’re hearing from innovators like ChowNow CEO, Chris Webb, that it is not only driving volume – as much as 30 percent of its mobile orders for its restaurant customers – but it is reducing the account acquisition process by as much as 35 percent. Both of those things solve problems for consumers and add value to merchants.
On the other hand, having to remember where Apple Pay is accepted adds friction all day long. And why, until Apple Pay acceptance at the physical point of sale is more prevalent, it will face the slog of slogs of adoption – just like every other mobile payments player has.
Which is why we think the space to watch is the combo platter of in-app plus Beacon plus in-store payments.