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Will Apple Pay Dominate Mobile Payments? Apple Pay Launch Cheered And Resisted

After launching alongside Apple Inc.’s two new versions of the iPhone in September, the company’s digital wallet, known as Apple Pay, officially launched on October 20. While there was no way for people to line up outside Apple Stores in order to use it, early indications are that there is real demand for Apple Pay, which allows consumers to pay for items with a tap of their phone.

At a Wall Street Journal conference in California on October 28, Apple CEO Tim Cook revealed that over one million credit cards were activated in the Apple Pay service within just 72 hours of its debut. In order for it to work, users of Apple Pay either manually enter their credit card account information into their phones or simply take a photo of the card.

In some ways, the rapid adoption of Apple Pay should come as no surprise. The six largest credit card issuers, which together account for over 80 percent of all credit card transactions in the U.S., were early supporters of Apple Pay. So, too, were the three largest credit card networks, American Express, Visa and MasterCard along with major retailers such as McDonald’s, Walgreens and Whole Foods. Taken together, there were around 220,000 retail outlets ready to accept Apple Pay when it launched.

While Apple Pay was met with enthusiasm by many shoppers, its reception was by no means universally warm. Indeed, as numerous media outlets, including Time and The Christian Science Monitor reported, a number of large stores have taken steps to ensure that their customers can’t use Apple Pay. Drug store chains CVS and RiteAid went so far as to remove the Near Field Communication (NFC) technology that Apple Pay relies on to function from the registers at its stores.

As Time points out, the reason for the rebuke of Apple Pay is pretty simple: RiteAid, CVS, Walmart and other companies are developing their own mobile payment system called CurrentC. The desire by the backers of CurrentC to see it prevail over Apple Pay is also not difficult to grasp. “It’s designed to sidestep the fees that retailers have to pay credit card companies like Visa and MasterCard every time a customer makes a credit card purchase, marking their latest move to duck those charges. Apple Pay, meanwhile, has the support of credit card companies because it keeps those fees intact,” writes Time reporter Alex Fitzpatrick.

If the resistance and competition Apple Pay faces worries Cook, he’s certainly covering it well. In fact, Cook believes that consumers will ultimately determine which payment system prevails. “You are only relevant as a retailer or merchant if your customers love you,” he told conference attendees. “It’s the first and only mobile payment system that’s easy, private and secure.”

October 31, 2014
The Race Is On: Comparing Apple Pay and PayPal

Comparing Apple Pay and PayPal. That is what a lot of consumers interested in ditching the plastic in their wallets will be doing now that PayPal has made it clear that it’s going to make a play for the growing mobile payments market.

For well over a decade now it has been impossible to think of eBay without also thinking of PayPal. True, PayPal has been a subsidiary of eBay since it was acquired in 2002, but the connection in the consumer’s mind was probably more visceral: In order to buy something online at eBay required a PayPal account. On September 30, though, that bond was snapped when eBay announced that it would spin off PayPal, which is set to now become its own publicly traded company in 2015.

Although repeatedly denied by eBay executives over the past year, the move does not come as a major surprise. And the reason it is happening, many speculate, is simple: Mobile payments. Indeed, while PayPal has become the go-to method of online payment, many consumers don’t even consider it when it comes time to make a purchase with a smart phone. Making that transition to become a leader of the quickly evolving mobile payment industry is a huge opportunity. Market research firm eMarketer expects the mobile payments industry in the U.S. to grow to $118 billion by 2018, up from just $3.5 billion this year.

Of course, PayPal is not alone in pursuing this large market. Google Wallet and other mobile payment options like Square have been around for years. Earlier in September, Apple threw its hat into the ring with the unveiling of Apple Pay, the announcement of which included deals with large retailers, such as Whole Foods and McDonalds.

Many observers believe that Apple will provide stiff competition for PayPal. A large measure of its advantage comes from the fact that Apple Pay is incorporated into the iPhone 6 and iPhone 6 Plus, which were purchased by 10 million customers during the first weekend it was available. “Competitors will be forced to counter Apple’s smart phone advantage,” Citicorp analyst Donald Fandetti said in a Bloomberg article. “We see good merchant and consumer adoption over time.”

Still, other observers contend that an independent PayPal will be more able to innovate and come up with mobile payment services and products that will challenge Apple, Google and other competitors. While it’s impossible to predict which individual company will flourish in the mobile payments industry, the sheer level of interest by big brands does indicate that the days of plastic cards are numbered.

October 10, 2014
Apple Pay No Slam Dunk

Apple is not big on subtlety. Its announcement party unveiling the new iPhone 6 and Apple Watch included a mini-concert by none other than U2, whose new album was also given away for free on iTunes, as part of the big rollout. The company’s introduction of Apple Pay, the new digital wallet that will be available to millions of iPhone users, while not quite as flashy, was also significant.

Apple Pay, which will use near field communication (NFC) to allow shoppers to utilize tap and pay technology to purchase items with their phones, was introduced with the news that American Express, Visa and MasterCard had all signed on in support, along with retailers representing 220,000 American stores. “Working with Apple, we’re excited to bring Apple Pay to tens of millions of Capital One customers,” said Frank LaPrade, the Capital One Chief Enterprise Services Officer, in the sort of enthusiastic vote of support that accompanied Apple Pay’s debut. “We are laser focused on the evolution of digital products and services.”

Even though Apple Pay received a big embrace from banks, credit card companies and many retailers, it faces plenty of hurdles before it becomes a mainstream payment option. For one thing, consumers who have been barraged with news about data breaches and thefts could very well be leery of a new payment choice – even if, as Apple points out, it is more secure than debit or credit cards. Retail consultant, Cathy Hotka, was quoted in a recent Forbes story asserting that adoption of Apple Pay would be slow, largely due to uncertainty around security. “A lot of consumers will have to be convinced that their data will remain protected,” she said. “With the choice between shaving off a few seconds and having a safer transaction, consumers will choose safety.”

Another issue is how quickly consumers will upgrade to Apple devices that are equipped with the NFC technology that allows Apple Pay to function. Larry Negrich, a vice president of marketing at nGage Labs was quoted in the Forbes article saying that he expects it to take four years for all iPhone users to have the technology required to utilize Apple Pay. Even when that happens, Negrich notes that will still only account for 50 percent of all consumers. “I think Apple has created a better total solution to the security issue. However what about the other 50 percent of consumer mobile transactions?” he said. “Retailers will surely be faced with supporting Apple Pay and multiple other mobile payment solutions all seamlessly-integrated into their years-old POS (Point of sale) software.”

Ultimately, though, even many of the skeptics about Apple Pay’s immediate adoption think it has great long-term potential. Tom Redd of SAP Global told Forbes that it’s easy to see why Apple will succeed. “Hey, the Millennials live by Apple, and if Apple says, ‘Do it,’ consider it done.”

September 18, 2014