It can seem in the three weeks since Apple Pay has rolled out, that the payments ecosystem has been in a competition to win the title of “Most Enthusiastic Apple Pay fan;” a competition that ensued when a certain Cupertino company entered the mobile payments/NFC playing field on 9/9/2014.
Recently though, and coincident with the actual release of the new iPhone and iOS8, the happy talk has taken a bit of a turn. Just yesterday, MPD founder David Evans wrote in his piece that though he’s been a believer for a long time that Apple was m-pay’s best chance for ignition, Tim Cook’s presentation on the subject was “mindboggling ridiculous. It was just nuts."
And it appears that Dr. Evans is not alone. Just yesterday, MPD CEO Karen Webster and Paul Purcell, a partner with VC firm Continental Advisors, sat down to talk about all things Apple Pay. Purcell was one of the first people that Webster spoke to, literally minutes after Tim Cook left the stage on 9/9. Then, he expressed some disappointment with what he saw, saying that not much was new or even that inspiring. In their follow-up chat three weeks out, Purcell has somehow managed to become more skeptical.
“I feel as this rolls out it’s going to loose a lot of steam,” Purcell told Webster.“I don’t think they changed anything and I don’t think incented consumers to change behavioral patterns, or merchants for that matter. I know that it’s Apple, but for me it’s just another cool factor, but I don’t see a lot of meat on on the bone right now."
Moreover, Purcell worries that the way that Apple Pay has been rolled out, stating that consumers can use it everywhere, could end up backfiring.
“I think user expectations that they are going to be able to take their iPhone 6 or 6 Plus and wave it to pay is just going to lead to a pretty messy consumer experience out of the box. And merchant experience for that matter,” Purcell told Webster.
Because merchants, contrary to popular report, according to Purcell, aren’t even close to universally excited.
“Which merchants are excited? Is Walmart excited? No. And they are 10% of domestic retail sales, that is a big participant that isn’t getting involved."
And while some large merchants, like McDonalds who’ve been early adopters of all things NFC and digital wallets, might have reasons to jump on with Apple Pay, he doesn’t think that the service holds any kid of universal appeal. Upgrading hardware costs money, staff needs to be retrained to understand Apple Pay and this is all without clear direct benefit to the merchants themselves.
“I saw ad for an ISO that they had blasted out to their merchant bases. It’s absurd, its false, its false advertising. They are incenting merchants to upgrade their hardware to accept Apple Pay. This is a servicer of small and medium sized merchants, they’re not going to be Apple Pay enabled, it’s silliness."
When Webster asked, “why is it silliness?” “Money,” according to Purcell. “People love the idea of Apple Pay, it is sleek, it is novel and it has a high ‘ain’t it cool’ factor that pretty much only Apple can bring to the table.” The problem now is, as Purcell sees it, isn’t bringing much more in the way of benefits to consumers or merchants. They are, however, bringing costs to the merchants who can expect to see the fees they are already paying go up. This will disincent merchants from wanting to adopt it, and if it isn’t widely available at their preferred merchants (as realistically shoppers really only go to handful of stores with any regularity) consumers simply won’t get into the habit of using it.
“I think people want this to happen. Okay. But just because you want it to happen doesn’t mean it can or it will. I still go back to the fact swiping your card is not broken. So what is the value proposition? And I think what’s really going to disappoint the merchant here is that they’re not going to have lower costs, they’re not going to get access to the data. And despite what Apple says, Apple is going to try to obfuscate the relationship just the way the networks have and the issuers have for all these years. So the merchants don’t get any thing but higher costs. “
Purcell acknowledges that the roll out so far has had some problems—iOS 8 is buggy, and even if it weren’t, both handsets and POS terminals can get the techno–hiccups and not work, which on the whole lowers anyone’s odds of wanting to use it.
“NFC has been a lousy protocol, people haven’t had fun in the test cases I’ve read about or tried to participate in. “
Which is not to say that Apple has been devoid of good ideas, in Purcell’s case—he believes that security advances around multi-factor authentication and tokenization will bring new opportunities for issuers, consumers and merchants, which is important.
However, even on the issue of fraud, Purcell advocates for a more balanced, less hyped-up view of the situation.
“Do we really have a fraud problem? Are the issuers getting eaten up? Are fraud loss rates exploding? I don’t see that. Now the numbers are getting bigger, but that is because the pie is getting bigger, but the percentage of the pie is pretty darn static."
Purcell added further, “The way the world is moving right now, at the rate of change, I think its very hard for anyone right now to get their head around the ‘am I safe and secure?’ point. And it’s not just from the cybercriminals. Unfortunately, I think people will start to become more comfortable with the new world order, which is that that there are mechanisms to make us more safe and secure but that breaches are going to happen. “
But at the end of the day, ignition of something like Apple Pay wont’ hinge on security. That customers feel their transactions are safe won’t matter if they are just not inclined to use their handsets for payment at all.
So can Apple Pay ignite? Purcell wouldn’t rule it out, but thinks a lot of big things are going to have to happen first.
“Nothing is really going to change until the merchant gets control of the consumer and the transaction. And the merchant is entitled to ownership of that relationship; it is their relationship. The great problem the merchant has endured for almost 50 years, is that through the expansion of bank issued credit is they’ve lost control of that customer and they’ve turned it over to networks and issuers."