A Stinging Indictment of Apple Pay Paints a Dreary Future

| Analysis

Apple Pay is technically very cool. It has many devoted fans and is growing overall. However, despite its popularity in geek circles, it is not being embraced by the majority of those who are capable of using it. The problem has many aspects that, altogether, create a continuing challenge for Apple. A recent analysis of Apple Pay delves deeply into its slower than desired adoption.

Eddy Cue introduces Apple Pay

Apple’s Eddy Cue introduces Apple Pay in October 2014.

Apple Pay Introduction

There have been many articles about Apple Pay, how to use it, where it’s accepted and Apple initiatives in foreign countries. It’s easy to find basic statistics about participating banks in the U.S. and elsewhere.

One article I can recommend that covers vast ground is at MacRumors Apple Pay: Everything We Know.

But Wait. A Deeper Analysis

Despite Apple’s enthusiasm and the embrace by banks and some high profile merchants, not everything is peachy keen with Apple Pay. Just about all of the fundamental issues that are holding Apple Pay back have been thoroughly diagnosed by Karen Webster at Pymnts.com. It’s all in this tour de force analysis: “Apple Pay’s Tough Twenty Months.” There, Ms. Webster digs deeply into the social forces and Apple strategy that have cast Apple Pay into a slowly growing but struggling affair instead of a consumer sensation used by all.

This is a long but well researched article that’s worth reading when you’re done here.

Much of the Apple Pay “problem” stems from consumer psychology, something that only recently has been well understood. I first dug into this back in June with “Many Apple Pay Customers Confuse Simplicity with Vulnerability.” But misperceptions about the security of Apple Pay aren’t the only obstacles. When Apple customers who have the ability to use Apple Pay are asked why they didn’t use it for a particular transaction, answers are, in order:

  1. I am satisfied with my current payment method.
  2. I am not familiar with how Apple Pay works.
  3. I have security concerns about Apple Pay.
  4. I had not heard of Apple Pay before this survey.
  5. I tried registering a card with Apple Pay, but it didn’t work.

To be sure, while people who are not enthusiastic about being a visible Apple techie have subjective reasons for not using Apple Pay, there are also commercial reasons for the lack of stellar adoption, namely merchant reluctance.

On the bright side, Apple has some big numbers to boast about.

Apple says that number [merchant locations] is north of 2 million worldwide, some 1 million in the U.S. (Of course, in reality at most of the places in the U.S. where people spend money, you can’t use Apple Pay because they still have not turned on NFC. Apple’s numbers also include vending machines where they are getting traction….

Growth in Apple Pay use.

Not exactly the growth we’re looking for. Image credit: Pymnts.com

However, that number could be a lot higher. It’s likely that the slow rate of adoption of Apple Pay is related to the financial and psychological forces that have slowed the adoption of chipped credit cards. For a related analysis of that, see this excellent article at Quartz: “The chip card transition in the US has been a disaster.

This Quartz article points out that consumers don’t like waiting for the chipped card transactions to complete and that small merchants, faced with the EMV Liability Shift, have weighed the costs vs. security risks and decided to not make the investment. At least for now. This article paints a depressing picture of competing interests.

When trying to figure out who’s to blame, you end up with a weirdly tangled web of misaligned incentives. Almost everyone involved—banks, credit-card companies, retailers and merchants, payment processors, terminal manufacturers—have been focused on their own bottom lines, rather than the impact their decisions will have on customers. And that’s created a maelstrom of incompetence.

The Apple Watch

A large part of the (in)convenience factor related to pulling an iPhone out the pocket or purse and logging in is solved by the use of the Apple Watch. However, the Apple Watch hasn’t been overtly marketed as a joyful Apple Pay experience, and too many potential customers don’t seem willing to purchase an Apple Watch for just that solution. Whether this reluctance can be defused in the future with ever more capable and perhaps less expensive Apple Watches remains to be seen.

Next page: The final piece of the puzzle. Can Apple fix it?

20 Comments Add a comment

  1. As a consumer who often uses ApplePay I see two problems:
    One is a simple lack of signage, no indication at check out that they accept ApplePay. Why should I have to ask?
    The other is a lack of trained clerks who themselves don’t know their store accepts it and/or doesn’t know how it works.

  2. Some physical stores we shop at regularly have Apple Pay and wife and I use it at those stores. Unfortunately, most stores we shop at don’t have it. We ask for it but that falls on dead ears and likely never gets passed to the decision makers. Where we would like to see Apple Pay gain traction is at the gas pump. None available here. The biggest challenge for Apple is likely Amazon; imagine if ordering on Amazon could use Apple Pay via Safari or the Amazon app. The two kings could create quite an Apple Pay Kingdom!!

  3. CudaBoy

    I know it’s hard to grasp but there are millions out there that don’t use Apple products let alone the watch bomb. Apple Pay is kind of a gimmick that addresses something that isn’t a problem to begin with. Add in the fact that in the real world it is not as fast as flashing a card – or should I say flashing a card PRE RFID CHIP because now at Ralphs the machine takes about 10 more seconds for a “chip” transaction. Still, it’s faster than a guy doing Apple pay; thankfully I don’t see anybody using ApplePay in North Hollywood. So far the best implementation of the RFID transaction is the first major one – Mobile’s Speedpass – it is stupid fast in & out.

  4. During Apple’s third quarter earnings call, CEO Tim Cook shared the following tidbits on Apple Pay:
    • “Tens of millions of users” are using Apple Pay.
    • Apple Pay monthly active users up more than 450% year over year.
    • Three out of four contactless payments made in the U.S. are done with Apple Pay, according to Cook.
    • Apple Pay is accepted in three million locations in the U.S. and in nine markets around the world.
    “The growth is astronomical, but the base is very small,” Cook said …

    And therein is the reality, “the base is very small” …

    Apple Pay—still a proprietary OS solution to a payments problem that simply does not exist …

  5. I am not sure I understand people who say that ApplePay doesn’t solve a real problem. It is security. I refuse to use a credit card at stores like Target who have had major breaches. Apple Pay would solve this issue for me. Perhaps a lot of people don’t care about securing their credit card information, but in the last 15 months my card has been compromised 4 times. Way too often for my tastes.

  6. Imagestealer

    I live in Canada. Since the implementation of Apple Pay by the major banks here, I have been using it more and more. With respect to CudaBoy, it is NOT slower than dragging out my card and inserting it into the card reader and then entering my pin. Of course, in Canada, our merchants are not so technologically backwards as the U.S. and have been using chip and PIN with tap and go terminals for some time now. it is so simple; have your phone (or watch) ready, when the clerk asks, tell them either CC or debit, double tap the home button and hold the phone (watch) near the terminal, and BOOM you are done. Nothing simpler than that.

    I have yet to find a retailer that accepts Tap-n-Go transactions here where that does not work.

    The only limitation is that the maximum transaction tends to be $100, which can be limiting. In that case you have to drag out your card.

  7. Bregalad

    Canada converted to chip-and-PIN ages ago and the last two generations of credit cards have had RFID so you can simply tap and go. Pretty much any business that accepts plastic uses chip-and-PIN. Tap is spreading quickly and customers clearly expect to find it everywhere. Businesses with older machines almost always have a prominent “No Tap” sticker attached. The only places I can think of that still require a magnetic swipe are parking lots where revenue isn’t high enough to justify upgrading the machines.

    One reason for the quick adoption of new technology is the structure of our financial system. There are essentially just 6 banks in Canada, all of them with a presence from coast to coast. A change made in one head office spreads to the rest of the country quickly.

    Canadian banks also push retailers to accept new equipment by charging higher processing fees for those still using older machines.

    Apple Pay took a while to arrive in Canada, but the rapid spread of NFC terminals means that many retailers have been ready for years.

    I don’t know whether Apple Pay supports all the various points and cash back deals offered by the credit card companies. At some stores I get 2% back from Visa, while my usual grocery store only takes MasterCard and has a points program tied to their cards that offers huge discounts on selected products. If I have to tap my MasterCard to collect points I’m not going to put that card away and get out my phone to pay.

  8. It would be a tragedy for Apple to drop the ball yet again when they are so far in the lead. To me, ApplePay is a no-brainer. It needs to be that simple for *everyone*, why do they struggle so with explaining what they are doing? Again, I would only invoke a ghost saying more, but this should not be an area where they are struggling, and I refuse to believe that one man carried all of the human-friendliness in Silicon Valley. Come on, guys. :/

  9. Karen Webster is to payments as Rob Enderle is to the computer industry… a lot of hyperbolic talk heavily influenced by some weird pre-wired Apple disdain. Karen makes a lot of weird jumps in her marketing piece, and makes a lot of grandiose statements which she then tears apart ( sort of like pitching to yourself ). InfoScout ( who make their money by selling your shopping habit data btw ), a partner of pymnts, did the research for the piece with pymnts. These are two companies that rely on gathering your data and selling it for a price… sounds exactly like two companies that have a hard time digesting one of the most important pieces of ApplePay for the consumer… NOT SELLING YOUR DATA! Anonymity, privacy, whatever you want to call it… is anathema to companies who rely on data mining for their very existence. Apple Pay is a wonderful incremental improvement to the world’s best ecosystem, despite what Webster says. Apple is doing payments the right way, with your privacy in mind, and will continue to improve the experience, despite what the naysayer says… eyes on you Karen.

  10. rocwurst

    Indeed nmo, that Pymnts data is quite suspect.

    In contrast, 80% of Apple Watch users have tried Apple Pay according to Wristly and 95% of Apple Watch owners report they would use Apple Pay if it were available in more locations.

    Also, the PYMNTS data is from the USA where contactless payments are in their infancy and it is terribly hit or miss as to whether a retailer supports it. In contrast, in Australia contactless is ubiquitous and iPhones have 38-45% smartphone market share – likewise in the UK and other markets so perhaps we need to wait for global stats to come in before we get worried about Apple Pay shall we?

  11. My SE will work with ApplePay, but:
    My debit card (easily three quarters of my transactions are debit) won’t.
    My credit cards from my Credit Union won’t.
    Most of the places I shop either don’t or don’t indicate they might.

    Yes it’s more secure. Yes it’s fast and convenient. Yes, it is superior to old ways of paying. Yes, I could change my financial institution, get new debit and credit cards, and start hunting for places that accept it. I could do that. But I won’t. I got better things to do than lobby for ApplePay. When/if it becomes ubiquitous I’ll be there with bells on. But for now I’m on the sidelines.

  12. rocwurst

    Of course, for those who haven’t been indoctrinated into thinking that current contactless cards don’t have glaring deficiencies, it is obvious there are very distinct advantages to Apple’s solution – particularly in combination with the Apple Watch that Philip Cohen refuses to accept.

    Tap your wrist to pay with the Apple Watch is significantly quicker and easier than having to fumble around with two hands in your wallet/pocket/bag for your tap-to-pay NFC credit card.

    Apple Pay is also far more secure than a contactless card which can be stolen and used to pay for items all day without any authentication. In contrast, a stolen Apple Watch or iPhone is useless thanks to Apple’s biometric authentication architecture. Heck, you can even remotely locate your lost iPhone using Find My iPhone – try that with a lost credit card.

    Apple Pay also has far better privacy only sending a one-off token during a transaction and keeping your user identification private from the retailer (something that PYMNTS and InfoScout are loath to lose since capturing that info is their business)

    Many believe tap your wrist to pay mobile payments are THE killer app of the Apple Watch and with sales outstripping iPhone sales during it’s first year on the market, the number of users is rapidly increasing.

    Apple Pay – still the best mobile payment solution for the nearly 1 Billion Apple users around the world.

  13. rocwurst

    The ANZ Bank one of the Big 4 banks in Australia has already broken ranks and partnered with Apple and been rewarded by a 20% surge in new customers.  75% of contactless payments in the USA are made with Apple Pay – that’s massive. No wonder the other big Aussie banks are shaking in their boots.

    Apple Pay is poised for massive success in countries with modern ubiquitous contactless infrastructure such as Australia that leaves the USA the real poor cousin.

  14. One thing that is bugging me with Apple Pay is that 9 out of 10 retailers have unnecessarily set up their checkout to insist on me putting in my PIN for my debit card after using ApplePay. It takes longer and if they don’t ask for my PIN, nobody behind me can see me enter it. This creates an actual security weakness instead of a security improvement.

  15. At least 4 of 5 “reasons” people aren’t using Apple Pay are marketing related, not technology related. What is Apple best at? Marketing.

    I live in small town where most local merchants don’t know what Apple Pay is, and so don’t accept that form of payment. If was up to me, I would use Apple Pay for every transaction I make.

  16. JustCause

    “Stinging Indictment” is just lost in a complex situation. Apple Pay is 4 pieces, any one piece without the others is only going to piss some off.
    First off, I love it it and use it at 80% of the places I go (I’ve stopped shopping at Target)
    1) technology exists and is available, check
    2) without all the banks using it, there will be problems and whining dumb @sses that follow
    3) without all the stores using it, there will be problems and whining dumb @sses that follow
    4) customers must know about it and use it , the more that know about it without both #3 and #4 being complete will create a cluster f#ck and ruin it for years to come.

    One need only look and the mandated by law change to chip in the USA to understand complex the adoption of Apple Pay is, it’s going great and if Target Stores would pull their heads out of their @sses and realize adopting it would differentiate them from Walmart would could really get some momentum. Apple Pay in macOS (hopefully tvOS also) is also going to be a driver….

  17. Seriously, you take anything Karen Webster says seriously? She is the anti-Apple, and her site is so skewed against Apple that we stopped reading it. Sad, since they do have some decent coverage of non-Cupertino events, but we get enough politics in our news feeds without that sort of negativism.

  18. Odd, but I’m finding Apple Pay increasingly available in my area of VA south of Richmond.
    At first I kept looking for the Apple Pay sign before trying it. Now if there’s a credit card terminal set up for contactless pay of any time, I give it a try and, more often than not, it works.
    Using my Apple Watch, paying at checkout (at least in my experience) is quick and painless.

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