Apple Pay

PYMNTS Talks Back About … Apple Pay

Variety, it is said, is the spice of life.

And nowhere is variety more important than when it comes to having a diversity of opinions on topics that are central to moving innovation forward. Having people disagree is how we find the common ground that makes good ideas the great ideas with the potential to be game changing.

So, PYMNTS.com can certainly check that box on Apple Pay!

The three stories that we published over the last two weeks—

—keying off the results of an InfoScout study on Apple Pay usage by iPhone 6 customers, generated a lot of commentary, discussion and good debate.

In fact, some of the discussions that happened in the comments section of the articles went on for days and raised a number of interesting points about the points of view that we shared on these pages.

So, without attribution, here’s a cruise through the storyline of the broad themes that drove the discussion on PYMNTS.com over the last two weeks. Where do you land?

“While I agree with many of the points that have been put forward in the article, isn’t it just a bit early to crucify Apple Pay?”

Lots of people respectively suggested that calling Apple Pay “a fizzle” after one month after it launched was way too soon.

"Clearly it’s difficult to get consumers to adopt a new behavior and yes the value proposition has to be very compelling and easy to use. Nevertheless, isn’t this just phase 1 to get the train moving?"

And, getting those trains moving was what a lot of people offered some advice and insight around.

Some felt that the shortcoming was related to not having enough banks enrolled.

"A significant uptick in the use of Apple Pay will be seen once many more (as in…well…many more) banks and credit unions get their customer issued cards to talk with Apple Pay and any particular business."

So, the secret sauce, some said, is to have more banks give more consumers more options to append to their Apple Pay accounts, that more consumers will push demand on the merchants. (It’s worth noting, though, that the initial launch partners represented 80 percent share of spend in the US…)

"It’s too early to call it a failure since only one bank in my wallet supports Apple pay. All others not so much and I work in banking software and anyone who does knows credit unions are always the last to join the tech party."

Some suggested that Apple and its partners even look to the clouds for some help.

"Another example of why Host Card Emulation (HCE) in conjunction with cloud credential authentication is a far superior solution than either Apple Pay or EMV for both consumer convenience and authentication."

And to third-party innovators to add value to its stakeholders to consumers…

"Apple Pay by definition can’t be a ubiquitous payment system in any case since it’s limited to being a plastic card substitute and limited to Apple users. That leaves consumer card benefits (frequent flyer miles, etc) in the hands of the card issuers and relies on the merchant for couponing strategies and costs related to them."

Including making it easy for consumers to know where they can use their Apple Pay accounts.

"I often find it difficult to figure out if a store will accept it. If it seems obvious they do, I try it only to have a merchant tell me it isn’t active. So I don’t really bother to try anymore. It’s just easier to pay with a card at the moment."

And giving them a reason to switch.

“People are still stuck in the past. We’ve all been taught to ‘swipe your card,’ and this needs to change.”

While others, based on their own experiences, suggested that merchants also have to feel as though the value they are getting by accepting Apple Pay is worth the trouble of enabling it in their stores.

"I completely agree that NFC adoption by retailers is typically very slow. My observation from the UK has been that it was hard to create a compelling business case for investing in NFC on its own, as a result most major UK retailers did not implement NFC as a stand-alone project."

At least one person thought that having a player like Square embrace it could help bring SMBs along (we don’t think they were from Square, but you never know).

“Square is going to accept Apple Pay and that will increase its usage by a lot. Small and medium businesses need to jump ship. They are the arteries of commerce.”

Now, there was at least one person who felt that the Luddites here in the U.S. (who never even adopted the metric system) really had no right to criticize Apple Pay for any reason, but particularly given its choice to use NFC as its enabling technology.

"The fact that the U.S. is still living in the Stone Age because too many cooks are involved in stirring the pot is not a good enough excuse; the fact is, the U.S. does ~33% of the world’s credit card payments but has ~50% of the world’s credit card fraud."

We have to admit, that did hurt a little bit.

As did the comments about the beverage of choice that was referenced in David Evans’ piece.

“’Stop drinking the NFC Kool-Aid.’ You joke, of course. EMV/NFC and contactless cards are ubiquitous in Australia, and it all works very well.”

Many in the payments community simply feel as though Apple Pay will be successful given its heft as a brand, its support from the incumbents and its ability to solve the in-app payments problem—something that many believe does overcome a key piece of friction today.

"In-app payments is the real story and we’re so early on that there isn’t even a rate category for acceptance here yet. The brands are working on a new third rate category (for digital wallets with varied degrees of authentication) that will much more closely approximate cardholder present…and then the real merchant push to accept Apple Pay (and other EMVCo token-driven methods) will begin."

It was hard for people to concede—early in the game or not—that Apple and its stakeholders wouldn’t do everything in its power to make Apple Pay successful.

“It doesn’t matter…because Apple Pay will still succeed” was a widely held view.

"First it will succeed for payments with mobile apps such as travel bookings, mobile commerce, food delivery, connections to loyalty programs, etc. In parallel with the broad adoption of online payments using Apple Pay which will happen within the next 1-2 years, the merchants will catch up and we will see retail mobile payments pick up."

And that to underestimate the power of Apple, Apple Pay and its stakeholders was done at your own risk.

"There are many strategies that could be employed to grow Apple Pay, from merchant incentives to card-linked offers, to opening the platform up to third parties. To assume that Apple or its partners will do none of these things, is unrealistic."

In other words, pay plenty of attention to the man behind the curtain who is busily working on V.2 of Apple Pay which will address many of its perceived shortcomings.

But to prove its success, some suggested that Apple may have to break out of one of its comfort zones in order to prove to the world that Apple Pay is successful.

"Apple is notoriously secretive and is used to controlling the message. Not with Apple Pay. Every issuer, association and processor knows exactly how many transactions are going through the network and what the trajectory looks like."

Perhaps even having Apple share information before they might like to in order to manage both the perception and expectations of the product, particularly since it was such a visible part of the launch of iPhone 6 and 6 Plus.

“Apple will be expected to talk about Apple Pay results during the next quarterly call.”

There was reference to the obstacles that Apple Pay faces in other parts of the world—like, some say, a compelling value proposition.

“Apple relies on international expansion to grow its base but the value proposition for Apple Pay is more limited in EMV countries as the fraud losses are far smaller.”

And, of course a business model that makes sense.

“There is not going to be a rush of issuers signing up to pay Apple fat royalties and footing their marketing bill when there is no adoption in the U.S.”

Speaking of the international community, there was no shortage of advice from those across the pond on how Apple and Apple Pay must crack the ignition problems that were referenced in both Evans’ and Webster’s article.

"Solving the chicken-and-egg problem remains possible if a) you are not wasting too much money [NFC chip in an iPhone is probably peanuts for Apple], b) you are patient [remains to be seen, but Apple is not VC backed, they have time], c) you bring value to users [has to improve drastically], d) you rely on standards and you’re not alone [NFC & contactless ecosystem still remains the best option]. Yes, issuing contactless cards brings very low value to issuers, and you have to consider it as an investment paving the way for NFC mobile payment. Yes, replacing old POS with contactless POS is not very appealing, but a) it is now mandatory in Visa EU regulations (that will help) and b) is that really such an issue when you need to migrate your U.S. POS to EMV?"

Still, some remained unconvinced.

"However, as it is now, I don’t believe it will be the disruptive force that it was billed as, for the following reasons: 1. As long as Walmart, Best Buy and other members of MCX do not jump on board Apple Pay will never have critical mass. 2. The creative business model does not work in the merchants’ favor as the card networks are treating an Apple Pay transaction as card not present, thus charging the merchants a premium. This is a negative incentive for merchants to adopt it. Financial institutions are happy to pay Apple the premium as the design of Apple Pay makes transaction data less vulnerable than card present transactions."

And even agreed that Apple Pay’s focus on NFC was a short coming.

"NFC is not where it’s at. NFC is nice and shiny, but doesn’t change the experience for the consumer and barely helps the merchant with EMV liability shift and such. NFC EMVCo tokens are a good thing for merchants. The real game changer isn’t much of a game changer just yet."

Even suggesting that the real potential wasn’t in the payment, per se, but in the opportunity to recreate the shopping experience for the consumer and merchant and monetize the data that comes from that interaction.

“The value is in the information about the payment, not how it is initiated.”

But that we shouldn’t be in such a rush, since Apple Pay certainly doesn’t need to be (although that was the core proposition in the article—the longer that it took, the more risk existed of it never getting off the ground).

“Slow and steady wins the race,” said one reader.

But there is still some doubt as to how the pay-by-phone movement will ultimately end up.

"Regardless, why would it not eventually become ‘a Norm’—if enough people have smartphones and then choose to use them for making payments; but, are smartphone payments ever going to approach, let alone eclipse, the use of the ubiquitous credit card at physical POS? I would doubt it…"

Clearly a question that some feel has already been decided.

"I think it will be pretty humorous to come back and read this article a year from now. Using stats from one study, and crying doom and gloom a couple of months in to a launch. Also consider that there are still tons of people waiting on backorders for iPhone 6 and in particular iPhone 6 Plus phones which are needed to even use this. Plus, it is forecasted for Apple to sell roughly 25mm Apple Watches which have NFC and allow the iPhone 5 and iPhone 5S to use NFC via the watch, which adds even more potential users to the mix."

We’ll be here.

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