In Depth

Cook: Apple Watch Poised To Propel Apple Pay

Apple’s “Spring Forward” event yesterday (March 9) provided more than just a dose of promotional jargon for its new lineup of products like the gold Macbook and Apple Watch. Instead, it gave the world a new scoop about Apple Pay’s growth, which CEO Tim Cook and his team expects to be propelled by the Apple Watch once it’s released next month.

Apple Pay is now accepted at 700,000 merchant locations — including 40,000 Coca-Cola vending machines —  and now works with over 2,500 banks, Cook said during the event. That’s nearly triple the number of merchant locations just three months ago. Earlier this year, Cook already declared 2015 the “year of Apple Pay,” which he affirmed yesterday when he discussed how the payment app aligns with Apple’s strategy to change how everyday tasks are done using technology innovation.


“Apple Pay is forever changing the way we pay for things,” Cook said. “It has gotten off to the most amazing start and has enormous momentum.”


In typical Apple fashion, its promotional event created a massive media buzz — but the popularity also had a counter-effect on the retail side of the business. Apple’s online store was offline temporarily given the demands of too much traffic. But those eager consumers who, literally, broke Apple’s site still have to wait a month to pre-order the watch, which will be available starting April 10. The watch will officially be released on April 24, with a list price that starts at $349 for the most basic model and goes all the way up to $22,000 for the most souped-up version of its gold model. Apple also promises an 18-hour battery life, which the Internet scoffs at given all of the functionality reported to be a part of the watch, which, of course, will only drain down the battery.

Cook — who tweeted out just minutes before the big event that he was “getting psyched” by listening to One Republic — kept the enthusiasm about the new line of products, including a joke about his own rapid heart rate to tease to a feature on the Apple Watch.


“The Apple Watch is the most personal device we’ve ever created. It’s not just with you, it’s on you.”


During the presentation about the watch at the event, it was noted that the Apple Watch is even easier than an iPhone to use to make a payment using Apple Pay since the watch doesn’t have to touch a merchant terminal, nor is a fingerprint needed. The watch can activate Apple Pay simply by being near the terminal (no distance was specified), where a NFC-enabled device will detect the watch. The consumer then gets an alert with a slight vibration about the purchase once the payment was made. A passcode is needed to set up Apple Pay, but that was recognized as a perk of the Apple Watch as it will prevent the watch from being used to make a payment if stolen. Once removed from the wrist, the passcode must be entered each time the watch is put back on for the payments function to be used. Also, like Apple Pay on the iPhone, no credit card information is actually stored on the device, only a unique placeholder code exists on the device for each account.

Among the features of the watch that were a focus during the event included the health and fitness tracking and enhanced messaging abilities, but for the payments space, all eyes are on Apple Pay. A brief demonstration provided mimicked the theme of how Apple Pay has been promoted since Day 1, highlighting the speed, convenience and security of the payments technology.

While Apple left out a few details of the Apple Watch prior to the event, like the launch date and price, Apple had given a few details about how the watch would be used to make payments. For example, Eddy Cue, Apple’s SVP of Software and Services, talked about how the watch can help propel Apple Pay further into the mobile payments space. Because there is no need to authenticate a purchase on the phone with the watch, the phone can unlock the watch to make purchases easier.

“You don’t have to authenticate on the phone,” Cue said. “Your watch has to be unlocked and your phone can unlock your watch and so it knows, if I took my watch off and gave it to you it would know. If I wanted to pay right now I could just pay with the watch and not have to take the phone out at all or unlock it.”

When the iPhone is near, Cue said the user doesn’t need to click the watch’s side button, use the Touch ID or enter a password. What Cue says may help the Apple Watch (and Apple Pay) gain traction, however, is that consumers can use Apple Pay through the Apple Watch even if they don’t have an iPhone 6. Since the watch supports NFC, an iPhone 5 is all that’s needed to make a payment via the Apple Watch. In that instance, payments can be made using a code through the watch or iPhone when the two are connected. Apple’s Touch ID security, of course, was also featured.

It’s undisputed that Apple has a loyal customer base with more than 700 million phones sold since its initial launch in 2007; and 74.5 million iPhone 6’s in Apple’s first quarter. But one big question remains: How many are likely to buy the Apple Watch?

The estimates vary wildly, ranging from 5 to 27 percent of consumers, based on a number of sources who claim to have surveyed smartphone and tablet users. 

A big question is whether the Apple Watch will, in fact, help ignite Apple Pay and increase its odds of success much. For Apple Pay to work, it has been reported that the iPhone has to be on the person to authenticate the transaction which introduces a level of friction that may make its use cases less appealing (and the appeal of the watch, more generally). 10476-2713-140912-Apple_Watch-lWhen consumers are out and about, their phones are generally within easy reach – as in, in their hands. Tapping at merchant terminal is not a big deal. Learning new payments behaviors with a new device  – e.g. the watch – that can only be used when the iPhone is present could make that process a whole lot more trouble than it’s worth for anyone but the early adopters.

But then again, this is version one and a noticeable step up in watch/wearables technology. Apple has, again, taken a category that was stuck in the mud and breathed new life into it. Hopefully version two will make the need to pair  a consumer’s wrist with their iPhone a thing of the past.

Here’s what a few payments pundits have to say about the Apple Watch as it relates to Apple Pay:


Jeremy Gumbley, CTO at Creditcall

The Hit?: “The fact that the Apple Watch opens Apple Pay to earlier iPhones is an interesting development, as this could help create a wider user base for the technology. Another interesting point in using the Apple Watch is that you don’t seem to need to authenticate with Touch ID as long as your iPhone is on your person. This is a positive development with Apple Pay’s user experience, as using Apple Pay and Touch ID with traditional payment terminals can sometimes be a little awkward.”

The Miss?: “To be considered among luxury brands, Apple has smartly priced its Apple Watch among the Rolex and Omegas of the world. However, Apple seems to be banking on a trend of wanting the latest Apple technology – which has historically served the company well – rather than developing a classic family heirloom (like the Rolexes and Omegas) that won’t render itself obsolete once the next model comes out. In carving out a luxury niche, Apple may alienate some of its fan base – who have always gravitated to the latest Apple gear, but have also had the gear fall within a somewhat accessible price point. It can be argued that the ‘plastic strap’ versions may fall into the realm of a reasonable price point, but unlike Apple’s preceding hardware, unless the Apple Watch offers new functionality and convenience in our lives (like the iPod, iPhone or tablet), then the Apple Watch may have a hard time to live up to its ‘Dick Tracey’ appeal.”

Will It Ignite Apple Pay?: “It’s too soon to say if Apple Watch will ignite Apple Pay but one thing is for sure, if it doesn’t, then at least Apple has eliminated another possible transaction vector – or at least demonstrated the challenges around ‘paying with your watch’ – or Apple will evolve the technology and try again. We also need to look at this from a consumer’s perspective – in order to use the Apple Watch with Apple Pay, one still needs an iPhone, which means for the whole device and payment application to work, it hinges on a consumer’s investment of $1,000 plus into Apple hardware. Most card issuers send you their contactless cards for free.”

Jon Squire, CEO at CARDFREE

The Hit?: “Given that this opens Apple Pay to anyone with a iPhone 5, or above, it’s a huge hit for Apple and a bigger win for mobile payments in general as this triples (or more, depending on the latest stats) the potential consumer adoption. Additionally, by providing the watch with its own SE (secure element)/NFC capabilities it appears the consumer does not need to be ‘tethered’ in any meaningful way to the phone itself.  Overall, this experience appears to be classic Apple, seamless and as close to frictionless as anyone has been able to do – can’t wait to try!”

The Miss?: “Also classic Apple, the BATTERY. Some of the other folks in the space are giving the consumer a week or more on a charge and having only 18 hours before needing to charge the watch introduces the only obvious piece of friction, as any removal of the watch seems to drive a re-authorization event. Not a huge deal and am sure Apple will introduce a human-implant for docking in Gen 2.”

Will It Ignite Apple Pay?: “Apple Pay is already the platform to be beat in the space, the addition of Apple Watch is going propel both growth and the distance to which Apple pulls out in front. They have proven again the beauty of a closed ecosystem, married tightly to the Apple brand halo, means you don’t have to be first, just better.”

Robert Wesley, Chief Strategy Officer at Aurus

The Hit?: “Everyday health and fitness is a whole new dimension for Apple and other consumer electronics companies. While Apple features marathon runners as the adopters, there may be a larger opportunity for baby-boomers to utilize as a more convenient way to monitor and maintain their health.

The Miss?: “The Apple Watch does not allow you take photos or connect with your friends using face-time. People like to capture the moment and share it with their friends. This is one of the key selling features of the iPhones. On another note, how waterproof is the watch? Will that become a big negative?”

Will It Ignite Apple Pay?: “The Apple Watch could help Apple Pay adoption because it is easier to carry than an iPhone 6 or even your plastic credit card when you’re on the go. However the real challenges with Apple Pay are enrolling and activating your card payment in with ease and security. I am not sure the Apple Watch solves that challenge.”

Richard Steggall, CEO at Urban FT

The Hit?: “The extension of Apple Pay from a consumer’s pocket to their wrist provides a nice bump in convenience at the POS. This added convenience will likely result in increased use of Apple Pay by those currently using it as a payments solution.”

The Miss?: “The lack of biometrics security looks like the biggest flaw of integrating Apple Pay technology with the Apple Watch. Biometrics security was originally touted as one of Apple Pay’s biggest strengths, so bypassing this step with Apple Watch will likely result in worried backlash from FIs and consumers alike.”

Will It Ignite Apple Pay?: “The Apple Watch trades security for convenience with regards to Apple Pay and in the short term will increase frequency of use among existing users. But because the Watch provides a variety of other functionality, it will also likely increase long term Apple Pay adoption.”

Keir Breitenfeld, Vice President of Experian Fraud and Identity Solutions

The Hit?: “Consumers want to have a frictionless experience when it comes to mobile payments combined with ease of use. Utilizing Apple Pay through the new Apple Watch appears to be another extension to make that happen.”

The Miss?: “The challenge with any new piece of technology, and for businesses, is preserving that frictionless customer experience foremost because fraudsters are always the early adopters. Substantial fraud losses were recently discovered though provisioning of stolen credit and debit cards to the Apple Pay application. With so many data breaches having occurred that compromised information allows fraudsters to navigate past the normal secondary authentication process to provision a stolen credit card onto Apple Pay. Card issuers have less than comprehensive control over the enrollment process and are liable for the fraud on these cards.”

Will It Ignite Apple Pay?: “The Apple Watch provides the convenience and it’s up to businesses and card issuers to maintain that great customer experience while not tipping off fraudsters. Today’s fraud prevention solutions can do both. Relying on advanced analytics derived from big data capabilities to truly assess fraud risk based on usage of an identity and a device provides the right balance for the business and maintains a good experience for their customers. For Apple Pay and other similar services to really ignite businesses – and card issuers – there must be collaboration across vendors and card issuers to support investment in more fraud solutions that provide a risk-based or multi-layered authentication strategy. The current climate dictates this and it is the best way to combat ID theft to grow the mobile payment industry.”

Souheil Badran, Senior Vice President of Digital River World Payments

“The rise of the Internet of Things, an idea that anything and everything can, and will, be connected to the Internet, is changing the payments industry and people’s lives in unpredictable and exciting ways. As mainstream consumers continue to adopt connected devices, including the Apple Watch, the Internet of Things will give way to the Commerce of Things – an idea that links commerce into the connected experience and devices.”

Will It Ignite Apple Pay? “Time will tell how the Apple Watch will impact Apple Pay adoption, but it certainly helps Apple emphasize that it offers unique, different, convenient and appealing ways to keep consumers connected as preferences for mobile shopping and payments evolve globally.”

Stephen P. Herbert, Chairman and CEO at USA Technologies

The Hit?: “In typical Apple fashion, Apple has hit this one out of the park. “Wearables” are not new, the technology has been around for years but this is the first truly interactive, fully integrated piece of wearable technology that has the potential to change the way people think about (and use) personal technology.”

The Miss?: “The only miss that comes to mind is that I don’t have an Apple Watch yet, but that will soon be rectified!”

Will It Ignite Apple Pay?: “I expect that it will, especially in the unattended market where convenience and ease of use have a direct correlation to impulse purchasing behaviors. Early adopters of the Apple Watch will quickly realize that Apple Pay functionality at any of our 200K locations is seamless, helping to accelerate consumer adoption of this type of technology.”


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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