Hard to believe it was just 30 days ago that Apple Pay officially launched and even harder to believe how different the ecosystem is today as opposed to what it was 31 days ago. Some are firmly in the camp that Apple’s entrance into payments will be the thing that will finally ignite not only mobile, but mobile via NFC. Others are becoming more vocal in the opinion there is more enthusiasm than reason behind the increasingly widespread belief that the opportunity to pay with Apple will flip consumers and merchants en masse to tap-and-go payment. And while a diversity of opinions exists between the “great white hope” and “great white hype” camps, everyone is talking about Apple Pay, and most conversation about payments for a month have been framed in terms of it.
“Did We Just See The Future of Mobile Payments?” was the question MPD CEO Karen Webster asked on September 10, 2014, the day after the full details of Apple Pay were announced. It was much too early to tell then (as it was more than a month before anyone anywhere would have a chance to try the service) but Webster noted “there are two limitations of Apple Pay right now for consumers and merchants. And it’s that old chicken and egg issue that gets in the way of every new payments system… Apple Pay ignition depends on merchants believing in Apple and consumers believing that merchants will believe in Apple.
So that’s why what happens next will be really important to watch.”
So what happened next?
PYMNTS, with the rest of the payments ecosystem, spent the next 40 days and 40 nights like modern-day passengers on Noah’s Ark watching, waiting and speculating about what would come next. During that time Apple, like the God of the Old Testament, said little.
Apple Pay Launches
Apple Pay launched with agreements in place with three of the major networks American Express, Visa and MasterCard, around 200K merchant locations (of 9 million merchants in the U.S.) that included Whole Foods, Chevron, Nike, Macy’s, McDonald’s, Walgreens and CVS among others. Apple Pay also launched with support from the 11 major issuing banks in the U.S. including Bank of America, Chase, Citi, Wells Fargo and Capital One, representing ~80 percent of volume.
About 1,000 customers presenting their Bank of America debit cards discovered double-charges at various Apple Pay partner retailers for their single purchases. The story first surfaced when a CNN reporter, Samuel Burke, discovered the duplicate charges on his personal BOA debit card, used at Whole Foods and Duane Reade. Initially, Bank of America said it was an Apple issue and Apple pointed the finger back at BOA. By the day’s close, Apple was issuing statements calling it “a Bank of America issue” and Bank of America issued a statement indicating that it was preparing a fix.
Discover CEO David Nelms declared late on Oct. 21 that his brand–the largest of the card brands to not join Apple Pay–will indeed soon be an Apple Pay partner. “I would say that we certainly do expect to be participating in Apple Pay. We don’t know when that will be but we will be actively working to be included over time,” Nelms said, adding his voice to the chorus that the payments space would love for mobile payment to be adopted more quickly.”
After accepting Apple Pay at all of its stores on the Apple Pay launch day on Monday (Oct. 20), the $26 billion 4,600-store Rite Aid pharmacy chain apparently changed its mind and yanked support from those stores Wednesday (Oct. 22), CVS quickly followed suit and unplugged NFC at with no official explanation offered at the time.
As it turns out, signing an exclusivity deal with MCX and their mobile product, CurrentC, actually requires merchants are exclusive with respect to their mobile payments offer in store. As Karen Webster noted “it probably didn’t seem like much of a risk three years ago since the big fox we were worried about letting into the hen house was Google Wallet. And, that’s gone nowhere fast. Oh, and of course, merchants also didn’t want to be forever held captive to the network’s interchange fees, either.”
When exploring global expansion for Apple Pay, China is the highest priority for Apple CEO Tim Cook, even though the service has yet to launch there. Cook, in an interview with China’s influential Xinhua News Agency, said that he wants to understand the Chinese payment system before asking banks, Chinese payments networks and retailers to sign on to the service.
“We want to bring Apple Pay to China. I’m convinced there will be enough people that want to use it. It’s going to be successful,” Cook said. “China is a really key market for us. Everything we do, we are going to work it here. Apple Pay is on the top of the list.”
When it was announced that Apple was adding TouchID to the next gen iPad, some questioned if it was a precursor to making ApplePay available as well. That seemed unlikely, since the iPad did not seem to come with an NFC Chip.
According to reports from 9to5 Mac “Teardowns of Apple’s new iPad Air 2 revealed an NFC chip that wasn’t officially announced by Apple.” Sources close to the company note that the NFC is only there to act as “a secure element” for in-app purchases.
As consumers are loading their credit and debit cards onto their iPhone 6’s, one of the most frequent questions they’re asking is where they can use Apple Pay, according to a MasterCard press release.
To help, MasterCard launched its Nearby App as a companion app for Apple Pay, enabling consumers to locate the 220,000+ merchants in the United States that can currently accept contactless payments, including Subway, Walgreens, Whole Foods, Toys R’ Us, and all Apple
Store retail locations. Consumers can make contactless payments at these locations by simply holding their contactless-enabled card or device to a reader. With the iPhone 6, users additionally touch their fingers on Touch ID or enter a passcode and the transaction is quickly authenticated.
Alibaba’s executive chairman, Jack Ma, said late Monday (Oct. 27) that Alibaba would like to partner with Apple on financial payments, but offered no details on what such a deal might look like.
“I hope we can do something together,” Ma said, stressing that it would need to be a “marriage” that both sides want. Apple CEO Tim Cook, who spoke shortly after Ma at a Wall Street Journal tech conference, said that he was going to meet with Ma to discuss possible partnerships, but also didn’t offer any specifics, not even that such a deal might involve payments.
If you’re going to go mobile payments, then really do it. That seems to be the approach of Wells Fargo, which is paying credit card customers $20 to sign up for Apple Pay. Debit and prepaid customers will only get $10 to sign up and will have to wait 45 days to get their money. “Use your iPhone 6 to make an Apple Pay purchase with your Wells Fargo Credit Card by November 30, 2014, and you’ll earn a $20 statement credit,” Wells Fargo said in its promotion.
CurrentC made a lot of headlines this week, but not because they meant to. The PR backlash as a result of the decision on the part of CVS and Rite Aid to disable NFC, and therefore Apple Pay, caused the mainstream media and social media channels to light up. Then to make matters worse, yesterday, the other shoe dropped as news of a breach surfaced. Those two things together forced the usually tight-lipped CurrentC CEO, Dekkers Davidson, to break his silence about all things CurrentC.
So, in an invitation only press briefing yesterday, Davidson opened up. Sort of. He affirmed mostly what others already knew–that merchants would have to (for the time being) choose between Apple Pay and CurrentC, but that no one would be punished for changing allegiances. He also noted that MCX might consider using NFC…someday…maybe.
If Visa’s focus on digital payments wasn’t clear before, CEO Charles Scharf made it clear during an Oct. 29 earnings call.
Its role in the digital payments mix also involves its popularity with Apple Pay users. While Visa is a strong backer of Apple Pay, Scharf took time to emphasis the company’s own digital payments innovations backed by the already strong products like Visa Checkout, which Scharf pointed out has 2 million registered users and a growing roster of merchants.
The CEO noted digital payments “are a huge focus for us inside the company. This quarter, we’ve started to see some tangible progress as we have begun to introduce new digital solutions into the marketplace. We are aggressively pursuing this market with the expectation of growing our share. We’ve seen several things to support this; Visa Checkout, Visa Token Services, Visa Digital services and Apple Pay.”
Apple can now add a new wonder to the collection brought to consumers by the introduction of the iPhone 6 and Apple Pay – it’s now ready to feed customers.
Not literally, but by enabling payment at restaurants booked through the popular Open Table app. Consumers using the payment feature on Open Table can now officially use Apple Pay to settle their check (if they have the right phone).
“The integration with Apple Pay makes the OpenTable mobile payment experience even more intuitive and seamless,” says Matt Roberts, CEO of OpenTable. “With Apple Pay, OpenTable diners can skip the step of adding a card to their profile and simply settle their check with a single touch using iPhone 6 or iPhone 6 Plus.”
USA Today weighed in on the Apple Pay MCX CurrentC issue and did not pull any punches. MCX, they said, seemed to be what would have happened had “the Three Stooges had been given the assignment of introducing a new and safer way for consumers to pay at some of the biggest retail stores.” Ouch.
The launch for the Apple Pay-accepting Apple Watch will not happen until at least March 20, according to comments made by Apple Senior Vice President of Retail and Online Stores Angela Ahrendts and reported by 9-to-5 Mac. The official Apple word on the watch’s planned release has been “early 2015.”
Ahrendts’ comment, made to retail employees in a video message, was “we’ve got a new watch launch coming in the Spring.” Spring in 2015 starts on Fri., March 20, and ends on Sat., June 20. Whether than reflects a delay from “early 2015″ depends on three things: how one defines “early 2015.”
The Apple Watch will allow iPhone 5 holders to use Apple Pay when the products are used in combination.
Apple’s October 20 debut for Apple Pay included support from many of the biggest banks in the United States, including Chase, Citi, Capital One, and Bank of America, but the company has said it has over 500 other banks working to roll out support for the mobile payments service. A few of the larger ones are listed on Apple’s site as launching Apple Pay support “later this year”, and it appears that this next wave is now beginning to roll out. Included Banks will be Barclaycard, USAA, and PNC.
After several days of defensive interviews about merchant restrictions and an E-mail data breach, the MCX CEO Davidson is finally talking up advantages for shoppers to try the CurrentC system to be rolled out next year.
The CEO was also asked about the merchant restrictions and he took another shot at addressing this will-never-die issue.
“Look, I’m an entrepreneur, I’ve run businesses, startup businesses for 20 years. As CEO of this venture, I’ve never in my career found that you get much mileage when you tell your customers what they can or cannot do. And so we’re not operating that way. From MCX’s perspective, we’re focused on building a compelling, affirmative, value proposition for our merchants or consumers. The respective decisions CVS and RiteAid made, and Meijer made, they have to make the decision that’s best for their business,” he said.
Since going live with Apple Pay last month, the $14.2 billion 401-store Whole Foods grocery chain has seen customers use the mobile wallet to process more than 150,000 transactions, according to CIO Jason Buechel.
But the chain doesn’t solely see Apple Pay as a payment mechanism. During its recent earnings report analyst call, both of Whole Foods’ Co-CEOs spoke of the huge publicity benefit from having accepted Apple Pay, not to mention the positive coverage and associated buzz.
“We were the first national supermarket to accept Apple Pay,” said Co-CEO John Mackey. “We are one of the top retailers in terms of number of transactions, and our seamless experience has been widely publicized.”
In the last few weeks a pernicious little piece of malware called “Wirelurker” revealed a chink in Apple’s armor, albeit a small one in this form. Wirelurker was discovered by Palo Alto Security firm Unit 42 last week. It is a pioneer of sorts according to Unit 42, a first of its kind malware for Apple that bypasses security features and installs third party applications on Apple devices, without the user’s permission.
Wireluker is what experts are calling a “Masque Attack” and while it’s the first, no one thinks it’s going to be the last. Currently, iOS does not enforce match certificates for apps with the same bundle identifier. In practical terms, what that means is an attacker can use any deceptive app title to lure a victim into installing an app that is a Trojan horse stuffed with malware. Once it’s there, iOS system will use whatever was downloaded to replace a real app (as long as both have the same bundle identifier). The fake, which has access to the data from the one it is emulating, looks nearly identical to the real app and can be hard to spot until after it is too late.
Target, one of the founders of MCX’s CurrentC mobile payment effort, has been using its employees to test the program, the Minneapolis Star-Tribune reported Nov. 4.
Target spokesman Eddie Baeb was quoted at that time saying that some Target headquarters employees had been testing CurrentC “in a couple of dozen Target stores around the Twin Cities” and that “Right now, it’s in a very early test phase.”
Target is an interesting player in the burgeouning mobile wallet wars–though they do not take Apple Pay in-store (as per their exclusivity agreement), they do take it for in-app payments.
Following its record-breaking $9.3 billion Singles’ Day sales, Alibaba is looking to work with PayPal to expand payment options, Bloomberg reported.
The Chinese Internet giant is also evaluating the merit of Apple Pay as an alternative for consumers when Alibaba’s Alipay isn’t accepted, Bloomberg reported Vice President Chairman Joseph Tsai said in an interview. Singles’ Day growth, which generated $5.9 billion in the first 14 hours of the day, may be enough to spur more partnerships.
However, on the same day, Alipay officials had made similar notations about Apple Pay’s potential as a partner for Alipay in retail market where it is not currently accepted. The talks are reported to be heading in a “positive” direction.
Visa CEO Charles Scharf said that not only is tokenization, “the single biggest change that’s been made in the payment networks easily over the past 15 or 20 years and maybe longer,” but he spoke about how it enables Visa to control the data and to potentially charge a lot more for it. Apple Pay, of course, is the first commercial application of the technology.
“Tokenization has opened up this whole world for us to be able to use digital devices to be a meaningful part of the payments flow in a way that (those payments) wouldn’t have in the past,” Scharf told attendees at the Bank of America Merrill Lynch 2014 Banking & Financial Services Conference. “Those of us that participate in the token infrastructure can make decisions on who you want to give access to, whether you want to charge for it and things like that. So it’s hugely meaningful to our ability to open up new channels and to make sure there’s clarity in terms of who controls the payment information. We put a rate schedule out there for tokenization.”
Airbnb announced this week that their current app has been updated. Within the new updates, Airbnb noted that the app would allow users to book and finalize accommodations in a seamless fashion by utilizing the newest mobile payment solution on the market, Apple Pay.
Users can now experience an easier way to sign up to access places to stay in more than 34,000+ cities and book both short-term and long-term accommodations and those with an iPhone 6 or 6 Plus can now book and confirm their accommodations effortlessly by utilizing Apple Pay.
Despite Visa and MasterCard still struggling to get into the Chinese market, Apple has found one way, working out an agreement with UnionPay to make it easier for Apple apps to be purchased there. In exchange, Apple will let Chinese consumers pay with UnionPay for one-tap purchases, but not (yet) Apple Pay, the Wall Street Journal reported.
“The ability to buy apps and make purchases using UnionPay cards has been one of the most requested features from our customers in China,” said Eddy Cue, Apple’s senior vice president of Internet Software and Services, in a statement. “China is already our second largest market for app downloads, and now we’re providing users with an incredibly convenient way to purchase their favorite apps with just one-tap.”
McDonalds is now reporting that Apple Pay is the payment mechanism behind 50 percent of all of its tap-to-pay transactions, which is more impressive than it sounds given the many years McDonalds has been accepting contactless payments. McDonalds has also been creative–although possibly impractical–about taking Apple Pay via its drive-thru. This is on top of recent reports thatWhole Foods saw more than 150,000 Apple Pay transactions when it first launched and that Apple Pay traffic forWalgreens has doubled its mobile purchases and that all of this has given a huge lift to other NFC mobile wallets.
“Quite frankly, a lot of it has to do with the strength of the Apple brand and how much merchants and customers love how easy the experience is,” Denée Carrington, an analyst with Forrester Research, told The New York Times. “I’m not saying it’s changing the landscape overnight. But this has never happened with other mobile wallets.”
Apple Pay has signed on hundreds of grocery stores throughout the country this week, just in time for the Thanksgiving holidays.
Apple officially announced on Tuesday that a number of grocery chains throughout New England, Chicago and southeast Texas are now on board to support the Apple Pay service. Joining Whole Foods and the original Apple Pay backers are Associated Food Stores, Shaw’s Supermarkets, Jewel Osco, Albertson’s, Bi-Lo, Harvey’s and Winn-Dixie.
Bi-Lo Holdings announced that customers would be able to utilize Apple Pay in-store at all of their physical locations. Winn-Dixie also published a video demonstrating how customers could utilize the service with their iPhone 6 or 6 Plus.