Image credit: Apple
"Apple Pay has the ability to significantly transform the mobile payment space." That's the conclusion of an ITG Investment Report published on December 19. A major finding is that Apple Pay has been responsible for one percent of all digital payment dollars. This is a "strong showing" given that Apple customers must have the latest iPhones and the limited list of merchants supporting it.
The principal findings of the report were:
1. 60 percent of new Apple Pay customers used Apple Pay on multiple days through November, suggesting strong customer engagement. In comparison, New PayPal customers used the service on multiple days during the same time period just 20 percent of the time.
2. Apple Pay customers used the service roughly 1.4 times per week and used Apple Pay at the same merchant for future transactions roughly 66 percent of the time. "We were particularly impressed with the adoption rates we have observed in our data."
3. Upon adoption of Apple Pay, the average consumer uses the service for approximately 5.3 percent of all future card transactions and 2.3 percent of all future card dollars spent.
The top five Apple Pay retailers were listed as follows:
Source: ITG Research
The report goes on to conclude:
We believe that Apple Pay could pose a major threat to PayPal in the future. Apple Pay, with its streamlined approach to both offline and online purchases, offers a compelling mobile payment solution. Given PayPal’s infrastructure barriers (a challenging relationship with payment counterparties and a lack of biometric capability), it would be difficult for the company to adapt to match Apple’s ease of payment.
Initially, it seems customers were testing Apple Pay with low dollar purchases.
Apple Pay users appeared uninhibited when using their device for any dollar amount, with the overall ASP [Average Selling Price] being slightly lower. We believe that some of this ASP delta is due to first-time users trying out the service at lower price points. As Apple Pay becomes more established, we expect ASPs to increase in line with traditional payment counterparts (when accounting for demographic biases of iPhone users).
The report notes that, "Apple Pay customers appear to be highly engaged. We have seen repeat rates well above the industry average, as well as frequent transactions, suggesting a high level of customer satisfaction.... The universe of Apple Pay users could grow rapidly as iPhone users upgrade their devices"
Finally, "Apple Pay has gained traction very quickly. In just six weeks they’re at 1.7 percent market share while it has taken Google Wallet THREE YEARS to gain 4 percent share. [Emphasis by ITG.]
The report noted no downsides or customer issues with using Apple Pay.