Categories: Mobile Wallets

Is The Pandemic Apple Pay’s Big Opportunity, Or Will In-App Payments Push Past?

Tuesday (Oct. 20th) is Apple Pay’s sixth birthday – a day that finds the digital payment method carrying a bit of the same air of great expectations that came with its launch in 2014. Apple Pay wasn’t the first mobile wallet, but it did mark the first time a mobile wallet launch sparked serious concerns that it could disrupt how in-store payments were made.

Apple had already more or less created the modern smartphone industry with the iPhone and remade the music industry with the iPod – so it didn’t seem too much of a stretch to believe that if Apple wanted to disrupt the plastic card, it could fall out of favor for in-store purchases.

But, as it turned out, even Apple didn’t have the power to change people’s payments preferences. PYMNTS has been monitoring consumers’ adoption and use of Apple Pay since it went live in 2014, and adoption over the last six years has been mostly slow-going, with actual use among consumers with Apple Pay-enabled phones struggling to get past the 5 percent mark. On the whole, the data showed that consumers didn’t have any real objection to using Apple Pay, but that they liked their cards and didn’t see a compelling reason to change how they paid at the POS.

That was before the COVID-19 pandemic broke out and provided that compelling reason – consumers no longer wanted to make contact at the point of sale. And that newfound hunger for contactless payment options, PYMNTS’ most recent Apple Pay data demonstrate, has increased its usage among consumers shopping in physical stores. On the whole, Apple Pay use for in-store transactions has gone up by 59 percent this year.

But for all the big growth, there are some caveats to explore before determining that Apple Pay has found its time to fully shine. Back in March, only 4.9 percent of eligible consumers (those with iPhones with the wallet installed and activated and in a store where Apple Pay is accepted) were using Apple Pay in stores. In September, that share has increased to 7.8 percent.

The “but” is that the use of mobile wallets in-store at the point of sale has more or less remained flat. Although Apple Pay now accounts for a larger share of in-store mobile wallet payments, it is a larger fish, still in a very small pond. The use of mobile wallets has remained flat, with only 5.9 percent of consumers with “the Pays” installed using them.

These are the results from the latest PYMNTS Apple Pay use and adoption study of a national sample of 2,998 consumers between Sept. 23 and Sept. 30.

Apple’s New Numbers Grove

Over the last six years, Apple has managed to at least get Apple Pay access into a lot of American hands. Of the 207.6 million U.S. adults who have smartphones that support mobile wallets, nearly 92 million can pay using Apple Pay at eligible physical store locations if they so choose.

As of Q3 2020, 93.9 percent of iPhones were compatible with Apple Pay, up from 39.2 percent in 2015. Moreover, taken against the entire smartphone market, PYMNTS research finds that 36.4 percent of all U.S. consumers have smartphones that are compatible with Apple Pay as of Q3 2020.

Getting those same consumers to use it, however, remains something of a struggle. PYMNTS’ recent data indicate that 2.7 percent of all consumers who shop at stores that accept Apple Pay actually use it, and the share of total sales that are paid for using Apple Pay at stores that accept the wallet stands at less than 1.5 percent of retail sales.

And while the use of Apple Pay has popped to 7.8 percent in response to COVID-19, that bump follows a long slump. Apple Pay use had previously peaked at about 6.3 percent in 2017 before declining to 5.2 percent just before the pandemic broke out in early 2020.

But our research does show some rather favorable trends in the Apple Pay numbers.

Apple Pay’s core customer base at this point may not be very large, but it consists of younger consumers, women and high-income earners.

Study data indicate that 73.1 percent of Generation Z consumers with an iPhone that had Apple Pay installed used it when making an in-store purchase during the study period, notably higher than the 52 percent for both millennial and Generation X users. The study also revealed that 57 percent of eligible consumers earning more than $100,000 in annual income use Apple Pay, and nearly as many are women. They are also more educated, with approximately half of eligible Apple Pay users having college degrees.

How Consumers Could Bypass Apple Pay

When one looks at the data holistically, it becomes clear that consumers’ preferences for contactless payments is part of a broader evolution in buying patterns and habits, according to PYMNTS’ most recent study with PayPal on the subject. More than 58 percent of consumers are now using digital channels to make purchases so they can avoid having to stand in line in a store. Demand for services like online delivery and curbside pickup are skyrocketing – mostly because consumers' evolving preference in the age of COVID is to avoid stepping up to the physical point of sale.

That means contactless customers may in fact be looking for a multichannel retail experience that they can undertake from within an app with embedded payment capabilities. The shopping may be done physically in the sense that the customer picks up the product in the store or curbside, but the transacting itself happens digitally.

The broader change that has pushed consumers to contactless payments has also pushed them to explore new multichannel commerce journeys, many of which don’t end with a consumer standing in front of a terminal at a physical store. They increasingly are ending at the curb in front of a shop, with goods and services delivered directly to the consumers’ truck, with the payment happening via mobile before the consumer ever arrived at their destination.

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NEW PYMNTS STUDY: ACCELERATING THE REAL-TIME PAYMENTS DEMAND CURVE – NOVEMBER 2020

About: Accelerating The Real-Time Payments Demand Curve:What Banks Need To Know About What Consumers Want And Need, PYMNTS  examines consumers’ understanding of real-time payments and the methods they use for different types of payments. The report explores consumers’ interest in real-time payments and their willingness to switch to financial institutions that offer such capabilities.