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The Subtle Evolution of Apple Pay

The Subtle Evolution of Apple Pay
Posted: May 4, 2016
Comments: 0
Author: Tom Davis

Apple Pay made headlines when it launched back in September 2014.  Many analysts celebrated, hailing the introduction as the advent of mobile payments. In reality, Starbucks was already successful with their mobile payments app, Uber was accepting payments in-app, and Disney had rabid fans paying for Mickey balloons and Mickey Ice Cream Bars using their Magic bands, years before Apple Pay launched.

Roll forward, a year and two months, and headlines were much more negative. One credit union publication headline exclaimed, “Black Friday A Black Eye For Apple Pay”. And even more recently, many articles have been written about the falling rates of Apple Pay usage at the point of sale (POS). Apple Pay usage has declined as a percentage (in a store that accepted Apple Pay, for a cardholder holding a eligible device) from a high of 5.9% in March 2015 to 5.1% in October 2015.

So what’s going on? Is the infatuation with mobile payments fading? Not really, and here’s why. First, the drop in usage is somewhat deceiving, as the number of new iPhone 6 and Apple Watches continues to grow in the market. During the 8-month period, Apple sold 74.4 million new iPhone 6 and its bigger cousin, the 6S. Many of those phones were cycle upgrades, people who just wanted bigger screens, and some who are not interested in making payments at the POS by tapping their new phones. So a much bigger denominator made it look like a sinking number of mobile payment – as a percentage.

In-app usage of Apple Pay is growing

But, another phenomenon is also happening. Many people who enrolled a card in Apple Pay tried it in store once, and not again. For some, there’s just not enough compelling reasons to tap the phone, versus inserting a plastic card into the terminal. But what the survey doesn’t pick up, is the growing usage of Apple Pay “in-app”. If you download Lyft, the second biggest ride-sharing service, on an iPhone, and if you have Apple Pay, the app doesn’t ask you to enter your payment credentials. It allows you to use your fingerprint to request a ride. And, the number of apps that accept Apple Pay is growing - Uber, BestBuy, Priceline, Staples, StubHub, Target, Ticketmaster, Kickstarter – in fact Apple Pay is used for payments from a downloaded iPhone/iPad app more than at a POS terminal for payment. Currently, 67% of all Apple Pay transactions are in-app, rather than at the POS. Chase announced it will accept Apple Pay at its ATMs. ExxonMobil will accept ApplePay at the pump via its mobile app. And Square readers, the SMB card readers plugged into tablets, will soon accept Apple Pay. And at the same time, pure adoption continues to rise (card loaded, first transaction made) from 15.1% to 16.1% over the same time period.

The shift to mobile payments is subtle

So don’t believe the naysayers. The shift to mobile payments is subtly happening.  Changing behaviors takes time.  There was a time when the thought of reading email on a cell phone was inconceivable to most. Then Blackberry released push email in 2003 and by 2009, 25 million users had adopted Blackberry email.  Now we are always connected on every device. It’s just a matter of time until mobile payments becomes second nature.

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Tom Davis

Tom DavisTom Davis

Tom is President & CEO of Trellance. He joined Trellance in 2004 and today wears many hats as highly respected executive and tireless evangelist on new payment technologies and innovations and how they will positively impact the success and growth of credit unions.

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