Apple Pay’s Merchant Problem

When Apple Pay launched last fall it was hailed in many quarters as the great white mobile hope — the service that was finally going to make mobile payments more than a pipe dream for millions of consumers the world over.

But as the year unfolded, reality set in. The quarterly PYMNTS/InfoScout data has shown that user adoption leveled off and began to decline in the total eligible Apple Pay using population (i.e. though there were more people with iPhone 6’s as the year went on, a lower percentage of them were using Apple Pay). The consumers who use it like it – the reviews were almost universally positive – but it didn’t become a habit.

The folks at Phoenix Marketing International say that’s because merchants don’t accept it.

Which is sort of an obvious point – no places to use it means no usage.

“Apple Pay took for granted merchants would rollout Apple Pay in their stores, and that didn’t happen,” they say.

An assumption borne out of the fact that Apple thought that the EMV draft would pull along the NFC wagon that would make acceptance a snap.

That, however, is probably one of the major speedbumps that Apple faced in 2015. In the best of all situations, merchants don’t easily take to upgrades, especially when there’s money involved in having to make that upgrade – and time for the necessary integrations to be completed. In a year in which many merchants were trying to absorb the big change that was EMV, that became more challenging – and less likely.

“The further issue is that of those merchants who did sign on, the roll out to the individual store level was slow and uneven,” PMI noted. “After the launch, they point out, that the only retailer that has Apple Pay in 100 percent of its locations was Whole Foods – and a full 14-months later that is still true.”

Customers frequently reported going to Apple Pay locations that presumably should have worked (they are a chain on the big list of Apple Pay merchants) only to get to the store and find out it wasn’t working yet, or that the staff didn’t know how to take a payment that way, or that there were issues with speed.

“The majority when asked said they wanted an up-to-date store directory of where [Apple Pay] is actually being taken. And this has been an issue since Day 1. Even after a year, consumers are still trying to find locations that actually take it,” the study’s author noted.

“70 percent of the people using it are reporting some problems,” PMI researcher Leon Majors followed. “Initially, again I believe the banks and Apple didn’t even realize that these things could even be an issue. Now I think the banks are doing better and training call centers to deal with those problems. Back in 2014 you had Apple and the banks pointing fingers at each other.”

What’s Next?

Despite these issues, PMI believes that Apple’s prospects remain positive going forward.

“We don’t think the problems with merchants and consumers will derail it – but it is sure going to slow it down,” the study’s author reported. The researchers noted that what some people were predicting would be a two-year climb to mobile domination is looking more like something that at the very lowest end estimate is going to be a five-year effort, they suggest.

Which, we at PYMNTS, think is still exceptionally ambitious.

We reported at launch, that the notion of getting merchants to update their POS devices to enable NFC and Apple Pay in anything less than a 5 to 7 year horizon was optimistic, at best. And, as we also pointed out, the longer that takes, the less likely that it will ever ignite in the way it was originally intended – other players are just able to easily slide in with newer technologies and a value proposition that goes beyond payments – to get consumers excited.

Because at the end of the day, mobile payments has to be about more than substituting a form factor – a phone – for a plastic form fact that works perfectly well today – a plastic card.

And preparing for battle, emboldened by the fact that on the battlefield of in-store mobile payments, there are no clear winners and lots of contenders hoping to emerge victorious: PayPal, Chase, Google, Samsung, Visa, MasterCard, Walmart, Amazon – to name a few.

And, at the end, it will be about the consumer and the value she receives from using any mobile payments application. But getting her interested and getting her hooked are two very different things. And that’s where it will get very interesting this year.

Because, as is so obvious, merchant acceptance is all about consumer demand. And the first player to succeed at creating that demand will crack both the merchant acceptance problem and the mobile payments ignition problem – all at the same time.