Two Years In, Apple Pay A Mixed Bag

What do you give the tech giant that has everything for its two-year anniversary?

Not china. Not cotton. Maybe more mobile payments users?

Anniversaries are a time of reflection, taking inventory on what went right in the years gone past and what could have, and should have, gone better. And so it is with Apple Pay, which laps the two-year mark on Oct. 20.

The reaction, 730 days in, as evidenced by the data and some feedback given to PYMNTS is … mixed. No extended honeymoon here. Through a number of interviews conducted by PYMNTS with retail and other executives, we found some nods to the general direction of accelerating adoption of mobile payments. But the devil, as they say, is in the details, and while you can’t please everyone, for Apple to get more than nibbles from in-store mobile payments, the journey may be a long one.

Apple is known for keeping some of those details close to the vest, and that holds true for Apple Pay. It’s not a big slice of the behemoth’s total top line, which weighs in at a staggering $230 billion yearly, and mobile payments are only part of the roughly $20 billion the company reports as its services segment, in which mobile payments are lumped. Those transactions are likely not enough to move the needle for Apple’s profits, but could they be harbingers of the future, of the true cashless society?

Maybe not — or, at least, not anytime soon. In the latest stats from PYMNTS, some numbers are sticky, and perhaps represent a sticking point. Thus far this month, the number of transactions being done via Apple Pay stands at roughly 4.5 percent, up very slightly rom 4.3 percent last month (so slightly that it might be a sampling error), and it should be noted, down from October of last year at 5.1 percent. How about those who have tried it and used it? Nineteen percent this latest go round, down sharply since a year ago (and you know first anniversaries always do get a lot of fanfare) at 30.7 percent. More than half of those surveyed jointly by PYMNTS and InfoScout said using Apple Pay is no easier than using a card and takes a similar amount of time.

Ouch.

This speaks to some stumbling blocks among the adoption curve. Why? The data shows that — as of now — there simply is not enough differentiation among using cards and using Apple Pay. And while the technology may be nifty, where there’s no clear-cut and perceived ease of use and saved time, it may be a while before Apple truly manages to “replace” the wallet (along with other mobile payments platforms, such as Samsung’s).

Roughly half of respondents said their current method of payment — that is, not Apple Pay — works just fine. And nearly 26 percent said they are not familiar with how the platform works. Complacency (satisfaction with the status quo) and confusion (how do you use this?) are buzzkillers, especially in payments.

Still, some industry participants and observers gave a thumbs-up to the progress that’s being made. “Take out the adoption metrics and whether it’s actually easier than taking a card out of your pocket,” said Anthony Walton, chief executive officer of Iliad Solutions. “The one thing Apple Pay has done is bring an intrinsic level of trust. It’s secure behind the scenes using tokenization — even people in the know think it’s safe. Android and Samsung Pay, following closely behind, have inherited this trust. Despite the scare stories in the press about contactless card fraud, I believe people think it is safe.”

And, continued Walton, the perception of safety, that Apple has cleared the path of the transaction itself, guarding buyer and seller, means the groundwork is being laid that reaches far beyond the mere form factor (that would be the iPhone, for now).

This “proof of concept” may potentially open the door for the next generation of IoT devices. Pay for my corn plasters by Fitbit, hold the petrol pump to my chip-enabled filler cap to pay for my petrol — the list is endless.” The final kicker is that, as Walton noted, the experience needs “a value add. I want a discount off my coffee, I want to pay for it and I want my next loyalty-based reward collected with one tap.”

In the meantime, there’s no dearth of partners linking up with Apple in anticipation of the (hoped for) adoption of mobile wallets — and in several different countries. In only the most recent set of announcements over the past few weeks, Apple Pay has broadened its reach into Russia, as of earlier this month, in conjunction with Sberbank and Mastercard. That follows the September announcement that the payments service will be available in Japan (and it should be noted here that there’ s a slight wrinkle in the technology here, for, in Japan, Apple will not be working with NFC but rather a technology called FeliCa).

July and April were a flurry of deployments and availability, as Apple added a number of countries to its roster, especially in Europe and Asia, with announcements tied to Hong Kong, Singapore, Switzerland and France. All told, Apple Pay now is available in 10 countries.

The field is getting to be a crowded one. In business, imitation is the sincerest form of flattery, and it is also the sincerest threat to margins. For Apple, the followers have included Walmart and Kohl’s, which are jumping on the mobile payments (in-store) bandwagon, along with CVS. Apple may have gotten a tailwind from the Samsung-specific woes of exploding phones (making switching costs perhaps low and, by extension, maybe, helping Apple Pay). And the pie is big enough to feed multitudes: In the United States alone, the value of in-store mobile payments is expected to reach $210 billion in three years, as estimated by eMarketer.

Though the stats mentioned above show promise on the initial inroads made by Apple Pay — after all, they came from a standing start — two years in, our interviews showed less sanguine views of Apple’s service and even mobile payments as a process overall, which may offer hints as to why transactions from near proximity are mired in the low single digits.

One chief complaint: The closed ecosystem for which Apple is famous, according to one executive, just doesn’t make the grade when it comes to payments — at least, not now.

Richard Steggall, chief executive officer of Urban FT, remarked to PYMNTS: “Wow, I couldn’t care less about the anniversary of Apple Pay or of any of the other ‘Pays.’”

“These device-specific, manufacturer-specific, technology-specific mobile wallets, which were launched to achieve corporate objectives that have nothing to do with payments,” he said, “only fragment the market with their ring-fenced approaches and complete disregard for seamless integration with a user’s life.”

It is the hardware focus, continued Steggall, that is “delaying mass acceptance of the mobile device as a primary payment tool.”

Steggall had some strong words for Apple Pay and its continued linkage with financial institutions — a relationship that, he said, ultimately, is of little use to the financial firms and might, in fact, turn out to be harmful. “It’s time for financial institutions to recognize that Apple Pay hasn’t been successful, and despite Apple’s huge successes in other areas of business, payments isn’t what they do.”

“Payments is what financial institutions do, and they do it better than any other business. Unless financial institutions want to speed their descent into the role of a mere utility, they must stop being complicit in enabling tech companies, which are all too happy to cherry pick financial institutions’ lunches, to co-opt their number one asset — control of the payments system.”

If control is one side to the mobile payments equation, another leg might be termed “normalization.” After all, any new technology and use case must traverse the Rubicon of unfamiliar to at least some level of comfort on the part of the user. And one executive, Mark Ranta, director of product management at ACI Worldwide, told PYMNTS that normalization has indeed occurred in the two years since Apple Pay’s debut.

“What, at the time, was somewhat novel — using your phone to pay for goods at checkout — has become mainstream, with most large merchants now accepting a whole slew of mobile payment types,” he told PYMNTS. “And we’ll likely see that list of accepted payments grow in the near term.” Ranta seemed unfazed by the data points thus far into Apple’s journey. “Some folks will point to disappointing CAGR growth/adoption or to the fact that, when Apple Pay was introduced, there was already a handful of options in the market.”

The experience proves an uneven one, say some, when separated into two separate use cases. Gijs op de Weegh, COO of Payvision, told PYMNTS that, for “mobile and web payments, Apple Pay certainly improves the experience of one-touch payments, but in-store, it is challenged by the slow adoption of EMV in the U.S. market and the modest growth of NFC … Distance payments (mCommerce), rather than proximity mobile payments (NFC), are still expected to grow the most by 2020.” But the impact may be a larger one.

“What Apple was able to do in that short amount of time was to put a spotlight on the mobile payments opportunity — and bringing a niche offering mainstream. If it were any other company achieving that in such a short timeframe, it would be heralded as an amazing accomplishment. That’s the bar that Apple has set,” Ranta added.

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