With Apple's history of changing consumers' digital behavior, it won't be any surprise if the iPhone maker's new mobile payment system will revolutionize payments just as it completely changed the way we listened to music and captured our memories. However, some analysts believe Apple Pay won't be the resounding success Apple claims it will be.
Apple Pay is just around the corner, and with the system ready to roll out on Monday, several stores and retailers will start allowing their customers to pay for services with just a touch of their Apple devices. However, mobile payment experts think Apple Pay won't become ubiquitous overnight, despite the overwhelming support poured in by the biggest banks and credit card networks. The success of Apple Pay, they say, does not hinge on support from financial institutions but on acceptance by the general public. Apple still has a number of obstacles to go through before Apple Pay can truly be called the game-changer its maker says it is.
"It's going to take a fair amount of time before this gains any notable traction," says Scott Kessler, head tech analyst at S&P Capital IQ.
Kessler says Apple Pay has a "small user base" to begin with, one that is limited to owners of Apple's pair of iPhone 6. So far, Apple has reported 10 million units of its new iPhones sold, but that is still a small number compared to 175 million Americans who owned a smartphone in June. Similarly, Apple says it has partnered with 220,000 retailers, including big names such as McDonald's, Walgreens and Whole Foods, but that is a mere fraction of the 6 million U.S. stores available.
And even then, some retailers, such are Starbucks, are not accepting Apple Pay in its entirety. Starbucks has its own mobile payments platform, which Starbucks says is used to pay 15 percent of all store transactions. Many customers prefer to use the Starbucks system because it rewards them with perks such as free drinks. Starbucks vice president Ben Straley says the mobile payment system is not just about payments, but also about rewarding customers for their loyalty.
Apple Pay requires the user to only swipe his new iPhone or iPad at the point-of-sale terminal and touch his finger to the TouchID sensor to confirm the payment. This, Apple says, takes a huge chunk out of what it calls the lengthy payment process and offers convenience, but some experts don't think so. Bill Maurer, dean of the School of Social Sciences at the University of California in Irvine, thinks Apple Pay and "all of these mobile wallets are looking for a problem to solve." And even with security being big on Apple's list, the limited liability of consumers in credit card fraud cases makes Apple Pay a little less disruptive than Apple thinks it will be.
"If all you're doing is transferring the [payment] process to the phone, then there's no benefit," says Matt de Ganon, senior vice president of product and commerce at Softcard, a mobile payment system developed jointly by America's major wireless carriers. "You need to wrap that payment with a lot of other capabilities."
Richard Crone, founder of advisory Crone Consulting, agrees. Crone points out to store-branded cards such as those used at Macy's or Bloomingdale's and says Apple's lack of support for cards like these leaves a "big gaping hole in Apple Pay." Customers frequently use their store cards to avail of discounts and other promos only to store card owners and might not want to convert to Apple Pay and relinquish their exclusive perks.
However, Apple believes it will resolve the initial problems over time, as consumers upgrade their phones and more merchants install NFC-enabled store terminals.
"We're trying to do something that I think is a game-changer and it requires a lot of people to play together," says Apple senior vice president Eddy Cue. "There's a lot to do here and we have a lot of work to do, but it should be huge."