Touch & Go: Apple Pay Puts Payments in the Spotlight



The debut of Apple Pay puts mobile payments in the consumer spotlight

The release of Apple’s slick iPhone 6 series late last year marked the tech juggernaut’s first real foray into the mobile payments market.

Apple Pay, a mobile-payment system powered by near-field ­communication (NFC), came preinstalled on every iPhone 6, with a ­promise that users would enjoy a shorter path to purchasing—and ­preordering—goods and services from their favorite merchants.

Thanks to the iPhone’s Touch ID feature, Apple Pay may very well be the fastest mobile payment system on the market. There’s no need to open an app or navigate past a home screen; users simply place their thumb on the screen to kick-start the purchase process.

Will the slickly designed feature finally persuade shoppers to swap their leather billfolds for digital ones? Or will Apple Pay go the way of the 4-year-old Google Wallet, which barely made a dent in the consumer landscape?

As with wearable device makers, mobile payment providers have a long way to go in convincing customers they actually need the product. (Is swiping a credit card really that cumbersome?)

“With all mobile payment systems, there’s the notion of trying it out for the first time versus its becoming ubiquitous,” says Michelle Evans, a senior consumer finance analyst and expert on the mobile payments market for Euromonitor International. “We’re still a couple of years from ubiquitous.” She predicts “consumers will give it a try.”

Apple users are famously adventurous—and like to feel they’re on the bleeding edge of technology. Yet Apple Pay can soar only so high when it excludes Android; in September 2014, Apple accounted for roughly 50 percent of the smartphones in the United States, according to B2B Insights.

Evans says Apple’s advantages in the marketplace include having “almost every bank on board—80 to 90 percent of the entities that control credit card transactions.” And by harnessing NFC—a technology that was roundly rejected by big-box U.S. retailers but is the norm in mobile payments solutions in Europe—Apple is offering a sophisticated, high-quality product.

A significant drawback with Apple Pay, however, is that it requires merchant buy-in for consumers to be able to use it. There are currently around 200,000 active retailers that accept Apple Pay, including Staples, Bloomingdale’s, and Whole Foods.

Apple’s path to nabbing more major retailers faces one roadblock: CurrenC. The just-released mobile pay solution from Merchant Customer Exchange (mcx.com) was developed by some of the biggest retailers in the United States, including Wal-Mart, Best Buy, Gap, CVS, and Target. Fifty brands—comprising around 100,000 stores that together do a trillion dollars in sales annually—accept CurrenC exclusively.

“Retailers didn’t like Google Wallet because they didn’t want a third party in the mix getting their data,” Evans says of CurrenC’s creation. “Apple Pay is certainly a better launch than Google Wallet, but it will never have players like Wal-Mart.”

Still, as more consumers embrace the concept of mobile purchases, there’s bound to be room for a handful of mobile payment providers in the marketplace. At the very least, the small but maverick innovations embedded in Apple Pay will surely play a role in shaping the category’s future.