Apple Pay’s Distracted Merchant Problem

Apple Pay officially rolled out on Monday and consumers and retailers both have had some time to get their feet wet with this new mobile payments platform. So, what’s the verdict so far? Well, Peter Osberg, Senior Vice President at EVO Payments International tells MPD CEO Karen Webster that merchants aren’t beating a path to their door … yet since they have other things on their mind.

KW: So, tell me, Peter, what are you hearing from merchants with respect to their interests in Apple Pay? And what types of merchants are you hearing from?

PO: In general, I think Apple has does a really good job of marketing their service and having marketers market the service as well. So naturally, merchants are really inquiring about the capabilities and how it works and how it will affect their rates. That said we’re not getting a lot of requests that go along the lines of “this is a service we have to have tomorrow”.


KW: That’s interesting. Why is that? Are they waiting to see whether consumers come in asking for it? What’s holding them back?

PO: I think a lot of time in payments; we forget that we’re just participating in the value chain between a retailer and a consumer and we think more highly of payments than what a business operator thinks about – which is taking care of customers. The reality is that swiping a card is not that big of a problem that we hear merchants complaining about. While they be curious, at least right now, they’re going about their day-to-day business swiping cards and taking care of their customers.


KW: That’s pretty interesting. When Apple introduced Apple Pay, it certainly brought mobile payments into the conversation in a way that it’s never been before, but it’s really just about payment. Were you surprised when you saw what Apple Pay was? And is that part of what’s holding merchants back? Are they waiting for the “something else” that will add value around the payment?

PO: I think we say the word ‘merchant’ we probably need to cut it up into different types of merchants of course. From Evo Payments’ perspective, we work with small to mid-size businesses. But the reality of Apple Pay being introduced when it was, from my perspective, is pretty brilliant. We’re right in the middle of the beginning of a re-terminalization process in North America with regards to EMV. And as you know Karen, NFC is not a new technology nor is mobile payments. There have been plenty of people who have cut their teeth and have had some moderate success over the course of the last few years, but Apple will be able to piggy back some of the NFC acceptance points because of the re-terminalization that’s going to be required as part of the EMV technologies that are coming.


KW: I was talking to someone earlier today and I posed the following question: From the merchant’s standpoint, is EMV first pulling through NFC because of the liability shift or is NFC pulling through EMV because of Apple Pay?” Maybe it depends on who you talk to and what merchants you’re serving but do you have an opinion on that?

PO: I think the numbers would say that EMV is going to pull through NFC technologies that will pull through wallet capabilities like PayPal or Apple Pay or others. And the liability shift is real, as you know; everyday there’s stories about breaches and with the liability shift and the reduction of fraud. At Evo Snap, we’re investing close to 95 percent of our resources in global EMV enablement to make sure that merchants are covered when that happens.


KW: Wow. So that says that there may not be a lot of time leftover for thinking about mobile payments right now which is a little unfortunate because the merchants really do want the mobile device to enable, not payment necessarily, but lots of other things that allow them to sell more things to the customer that comes into their stores or who might come into their stores if they were given the incentive to.

PO: I agree with you 100 percent. It comes down to the simple reality of what retailers what. Generally they want to do three things, from our conversations with them. They want to find new customers, they want to deepen their relationships with existing customers and they want to increase how much they buy. And mobile, we’re finding, has been a really great venue to enhance promotions, offers, loyalty, to help with those three things, that really has little to do with a payment method like Apple Pay.


KW: Do you think that Apple Pay will mean that NFC will become the way mobile payments happens in physical retail? Will it be the standard?

PO: I think of NFC has a communication layer, it’s not really a payment type or method. We’re actually seeing Bluetooth than we’re seeing NFC technology in some respects but from Evo’s perspective, whatever the communication protocol is, we don’t really care what it is, we’re just going to support it and make sure our retailers can be taken care of.


KW: Well it’s still early days and I think if nothing else, what Apple has done with Apple Pay, is to refocus the conversation about the importance of mobile in not just payments, which is what their focused on today, but I think the things that wrap around the payments that add value to consumers and merchants. And there will always be the early adopters who have to have it and play around with it but for it to become mainstream, consumers have to want to use it and ask for it. And then merchants will start asking for it too. I think that’s how it will go, would you agree with that?

PO: Yeah, we’re already seeing it, honestly. If you look at the Apple consumer, it’s a very elite group of people. So we’re seeing pockets right now of adoption at more everyday spend kind of category places with Apple Pay with a very specific, high income kind of person. If you haven’t done it, it’s very fast, it’s very secure and the customer experience is fantastic. And that goes back what I said at the beginning, generally most people still don’t have a problem taking out their credit card and so we are finding those early adopters will.

But I think we’re going to hear a lot of very successful stories in high-income pockets and probably high tech markets like San Francisco, Manhattan, and Austin and Seattle, maybe Vancouver. But it will take time to spread. But, again I think that’s the great thing about Apple’s timing, because of this re-terminalization process, they’re just going to let it adopt as the market is willing.

Now, as a global company, Apple’s tougher challenge is taking Apple Pay global, country by country, regulatory agent by regulatory agent, pricing model by pricing model. It will be very interesting to see how adoption can be created outside of the US.


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