Controversial

What Tim Cook Didn’t Say Yesterday

You don’t get to snag the top slot on the Payments Innovation Index (Pii360) – the rankings of the largest 100 companies in payments – without being innovative. Apple took the honors in 2015 and its innovation was on display in spades at Apple’s “Special Event” yesterday.

We saw One Republic perform, got a glimpse of the new Apple TV, saw a sneak peek of iOS9, and got a look at the mother of all iPads and a couple of new iPhones (6S and 6S Plus).

Minus a commercial that showed off the new iPhones (and reminded the crowd they can, in fact, use that phone to pay), and a tease for how consumers will be able to shop via Apple TV, we heard crickets with respect to Apple Pay. And not all the One Republic hit songs in the world can make up for the collective sigh of disappointment that reverberated throughout the payments ecosystem as a result.

Now, in fairness, Apple Pay was front and center back in June at WWDC. So, perhaps Cook and Co. felt that Apple Pay needed to make way for the other things in Apple’s bushel basket of innovation.

So we thought we’d refresh your memories on all that is Apple Pay — one year since it first hit the payments scene.

Merchant Acceptance


What’s Happened

The bane of any new payments method existence is acceptance, and Apple Pay is no exception. At rollout, Apple Pay announced 220,000 merchant locations supporting its NFC capabilities, many of which were NFC-enabled holdovers from the early days of Google Wallet. Later in the year, Apple Pay added ~350k more via unattended retail (aka vending machines), and inked a deal with Square to deliver ~250k free NFC and EMV enabled dongles for micro-merchants. Just last month, North American Bancard and Apple announced that the latest version of the former’s PayAnywhere Mobile device — to be released this month, available exclusively at Apple retail locations throughout the U.S. and online in the App Store. It is said to be the first-ever Apple Pay-ready mobile credit card reader. In addition, Apple added ~250k retail locations in the U.K.

With respect to merchants, Apple Pay landed a few new retail partners: Rite Aid, Target and Best Buy, sending shivers down the spines of MCX and CurrentC in the process.

More recently, Apple Pay is lighting up terminals on college campuses. Tim Cook recently announced that Apple Pay would be added as a payment option to ~700 universities by the end of the school year – with the University of Oklahoma as one of the ones it’s made public. No better way to train a whole new generation of users than to get them hooked while in a captive environment called college where mobile phones are viewed as an essential accessory.

That’s just on the physical store side. Apple Pay has reported growing instances of in-app acceptance as well. Apple does not release specific figures, but merchants who have activated Apple Pay claim conversion rates that are 2-3 times higher.

On the issuer and network side, with the addition of Discover, Apple says that it covers roughly 98 percent of all credit card purchase volume in the U.S.

[bctt tweet=”The bane of any new payments method existence is acceptance, and Apple Pay is no exception.”]

What’s Next?

Things to watch for here are what new merchants might come into the fold for the holiday 2015 shopping season.

New Features (Loyalty)


What Happened

We heard back in June that the launch of iOS 9 would mean big changes for Apple Pay. First, Passbook will officially be rebranded as Wallet. That is a subtle but powerful signal that the app on the phone where all Wallet stuff is consolidated is actually, in fact, called Wallet.

But what got the Interwebs a buzz was the new loyalty capabilities that have the potential to add real value to consumer and merchant interactions. Beyond credit and debit cards, Apple will now enable rewards and store issued private-labeled cards, as well as gift cards. This functionality gives merchants more options for how their customers can use their Apple Pay accounts and their loyalty rewards without the current two-step shuffle, including a pretty slick auto presentment feature that, once provisioned, is smart enough to associated a loyalty card with a particular merchant during checkout.

The benefit, of course, is that consumers will no longer miss out on reward points and merchants won’t miss out on knowing who is using their loyalty programs and points.

What’s Next?

We all know that mobile payments ignition is less about payments and more about the other cool stuff that gets wrapped around payments, including loyalty, that take the consumer/merchant relationship to a whole new level. Now that the capability is enabled, we’ll be watching to see who does what to bring these capabilities to life – and whether Apple does anything on a programmatic level to help move merchants and consumers in that direction.

[bctt tweet=”Mobile payments ignition is…about the other cool stuff that gets wrapped around payments.”]

Global Expansion and Limitless Payments


What’s Happened

Apple made its first foray outside of the U.S. in the summer of 2015 and hopped, skipped, and jumped across the pond to the U.K. After reportedly running into a few snags over its business model (BPS on transactions), when Apple Pay launched then, it reported 250,000 locations and eight banks. Since then, it has added five banks — including Barclays —who’ve committed to coming on in the fall.

The U.K. may be contactless terminal heaven, but contactless payments limits are holding things back. The ceiling has recently been raised to £30 (not even $50), yet not enough to get consumers jazzed to use their wallets for anything but transit and coffee. In a big and important development, Apple is working with the merchants and payment networks to push for limitless contactless payments, a move that the combination of mobile plus TouchID makes plausible.

[bctt tweet=”Apple is working with merchants/payment networks to push for limitless contactless payments”]

The other major country on the Apple Pay waiting list is one where Apple has set its sights and made some gigantic inroad with the iPhone: China.

We’ve heard nothing about if, or when, Apple could ever get Apple Pay into China — but the surge of iPhones in the country suggest that China is going to be Apple’s hot market for some time. Cook said that in the past year, iPhone sales growth in China has surged 75 percent, which led him to make one bullish comment: “iPhone6 is the most popular iPhone ever. It’s the most popular phone in the world.”

Next on the list for Apple Pay is likely Canada, where the payment option should be launching as early as November of this year.

What’s Next

For those looking forward to the day when they can use Apple Pay in Australia, there may be a longer wait in store. Reports indicate that Australia’s banks are less than wholly enthused to jump aboard the Apple Pay bandwagon. More broadly, Apple Pay’s business model – a series of bilateral negotiations with issuers and merchants – does make it harder for them to get to scale on a global basis.

Getting to Ignition


What Happened

Apple Pay was Apple’s “one more thing” last year this time. It was the answer to the clunky leather wallet and the embarrassment of having to root around in a huge purse to find it. Millions of dollars in advertising, including Super Bowl ads, were intended to make consumers aware that they can pay with their phones. As long as they had iPhone 6’s or 6 Plus’ —and as long as they were in a merchant that accepted NFC.

Their initial excitement and enthusiasm was palpable. When we interviewed consumers on Black Friday – about a month into having Apple Pay available to them, those who had tried thought it was the bees knees.

[bctt tweet=”Apple Pay was Apple’s “one more thing” last year this time”]

A year later, that story has changed a bit. iPhone 6’s have flown off the shelves, but Apple Pay reception has been muted.

In March of 2015, a survey that PYMNTS did with InfoScout of ~1000 consumers with iPhone 6’s and who were in stores that accepted Apple pay data indicated that 15.1 percent of eligible Apple Pay users had tried the service. When surveyed in June 2015 that had fallen to 13.1 percent.

Usage fell as well. When asked in March,“Did you use Apple Pay on this transaction?” just 39.3 percent of consumers said yes. When asked the same question in June, only 23 percent replied in the affirmative.

But here’s the killer stat. Apple Pay also seems to have seen a dip in its committed users.

In March, 48 percent of iPhone 6 consumers in a store where they could use Apple Pay did. In June, that number had dropped to 33 percent.

Have we mentioned that mobile payments is hard?

Apple, with Apple Pay, appears to be comfortable playing the long game – app on phone that people want to use because it does cool things beyond just payment at the stores that they shop.

[bctt tweet=”Apple, with Apple Pay, appears to be comfortable playing the long game”]

So what’s next?

Ignition and ignition strategies that will reverse that trend. This year, though, Apple Pay faces a whole new crop of competitors. Both Android Pay and Samsung Pay are expected to launch this month and have different strategies designed to get consumers and merchants on board. There’s an independent and acquisitive PayPal, and certainly a few more contenders revving their engines.

And, now Apple and everyone else, needs to decide how they’ll use their respective assets to inspire the ecosystem (and the  stakeholders within in it) to create the experiences that will win them over. 

For more news on Apple Pay adoption, click here.

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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 July 2019 Pay Advances: The Gig Economy’s New Normal, a PYMNTS and Mastercard collaboration, examines pay advances – full or partial payments received before an ad hoc job is completed – including how gig workers currently use them and their potential for future adoption.

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