Apple Pay’s Big Drop

About 18 months ago, Apple Pay awakened the world to the possibilities and potential of using a mobile phone as a replacement for a plastic card at the physical point of sale. Could Apple succeed where so many had failed? The world watched, waited and speculated.

PYMNTS, in partnership with InfoScout, decided to put some data behind the watching and launched the PYMNTS/InfoScout Apple Pay Adoption Tracker in November of 2014. And ever since then, once a quarter, we push a survey to customers who can use Apple Pay (were in a store that accepted it and had a device capable of tapping into it) “in the moment” to understand if they’ve used Apple Pay to complete a particular transaction, and, if not, why not. Our study actually looks at what consumers have done, not what they might do if given the opportunity.

The latest results were presented at PYMNTS Innovation Project 2016 yesterday at Harvard University. And they are a bit troubling if you’re Apple.

The good news is that more consumers are trying Apple Pay.

But that’s about it for the good news. The bad news is that trying it is not building converts. Lots of users don’t use it again. Eligible usage is off 24 percent from last quarter and down 41 percent from this time last year.

But that’s not the most worrisome finding if you are Apple Pay. The study revealed that for the first time, consumers are making a conscious decision to use something else — namely a card.

Complicating these findings somewhat is that Apple is failing to inspire committed users in a field that is growing ever more crowded. For the first time, PYMNTS and InfoScout expanded our tracker to the other prominent wallet players that tend toward appearances in headlines. And they are ahead of where Apple Pay was at the same time in its lifecycle – and one of those rivals is doing a better job of inspiring repeat uses.

The Good News

It looks like an increasing number of users are at least trying Apple Pay, at 23 percent. This reflects a change in the data pattern from the previous two studies, which indicated that a decreasing percentage of users were experimenting with Apple Pay.

The results suggest that the decline was consistent with the diffusion of Apple Pay now beyond the technologically enthused early adopters.

So, Apple has been effective in getting the word out about Apple Pay to a wider base of potential users.

The problem is they might be catching user interest, but they aren’t holding it.

Declines In Repeat Use

The not so good surprise, from the point of view of Apple Pay usage, is the simple fact that repeated use is on the decline.

It appears that people are not finding enough value and are choosing other methods of payment instead, which are cards, and, interestingly, cash.

Why the lack of repeat use?

Ubiquity has a part to play here as “forgot” remains the leading reason at 21 percent, but that has dropped since previous surveys when it represented a third of the cases when consumers took a pass on re-using Apple Pay. Lack of certainty about whether or not the store accepts the payment method is in the No. 2 spot, represented by 16 percent of consumers.

That’s not great news, but worse news is the rise in cases where customers could have used Apple Pay but chose to skip it in favor of paying with cash (14 percent), because they didn’t want to (13 percent), or because they didn’t felt comfortable using the system (7 percent). All in, one-third of the time, consumers aren’t using Apple Pay again because they like something else better or don’t like it enough to try it out again.

Rising Competition

Apart from falling repeat usage, Apple Pay also faces a host of emerging competitors also trying to snag the as-of-yet still untapped 97 percent of transactions where mobile payments could theoretically be happening, but aren’t yet.

Moreover, though Samsung Pay, Android Pay and Google Wallets’ adoption rates lag behind Apple’s at this point, they are doing better than Apple was at the same time in its rollout. Samsung Pay, the data show, is performing better in terms of repeat usage.

So Apple, it seems, has done a good job of paving the way for other mobile players — if for no other reason by bringing attention to the space.

But, if it can’t find a way to add more value beyond a form factor substitute, that data suggests that it may run the risk of being passed on the trail it helped to blaze.