Analysts wonder whether ‘Apple Pay’ will change the market scenario? After all, Apple has a strong position due to its large user base, fantastic deals with card networks (worked closely for more than an year with them) and its ability to influence tech adoption (being a great educator). However, there are several factors working against Apple Pay.
- There are more than 90 mobile wallet s operating in the US alone.
- The vicious circle of low adoption among consumers and acceptance infrastructure at merchants is creating a hurdle for mobile wallets to explode.
- WalMart, Best Buy and other large retailers have collaborated to form their own mobile payments system.
Apple faces retailer-led issue
Back in 2012, big retailers like Walmart, Target, CVS and Best Buy collaborated to form Merchant Customer Exchange (MCX), their own mobile payments system. MCX recently launched the “CurrentC” mobile wallet and immediately boasts a membership of 110,000 retail locations including, not only the big box retailers, but also restaurants, clothing merchants, convenience stores, airports and airline concession companies.
According to MCX, CurrentC will be a repository of loyalty cards and a means of distributing, storing and redeeming digital coupons and special offers. CurrentC’s functions will also integrate directly into MCX members’ branded mobile apps. MCX members are clearing the way for their own digital wallets and aren’t supporting NFC based payments. With MCX already having a substantial support (it has Walmart, Best Buy, etc.), it would be tough for Apple to convince these merchants to make the switch, especially given the fact that retailers have to invest in NFC terminals. Tom Noyes (Payments Expert) was quick to remark on Twitter to our question that the only new NFC merchant added by Apple was Disney. They have a lot of work to do on that front.
In recent news, Weve, UK’s popular m-commerce platform, has announced they have no plans for a standard mobile wallet service. Weve was a joint venture between the three operators: EE, O2 and Vodafone. ISIS (JV between US operators) is also not doing well in the US. Industry experts believe that operators are loosing the race to mobile payments supremacy. Apple Pay maybe the final nail in the coffin. It might be in their best interest to work with it than against it.
PayPal and other wallets
Apple site gives 6 “highly recommended” payments partners – Stripe, First Data, Authorize.Net, Chase Paymentech, CyberSource & TSYS that can process Apple Pay purchases for app publishers. But Paypal/Braintree are not there on the list as noted by Re/Code. Its very clear that Apple Pay will compete with Paypal/Braintree head on in both offline and online world. And this is just the strongest wallet in the market today. The 90+ other wallets have a tough time ahead too. Next 9-12 months are crucial for their survival.
Apple partnered with VISA and likes with an international ambition. Visa already had VisaNet protocols in place to enable ApplePay in many countries – that’s hitting paypal in its sweet spot. Experts believe Apple Pay will succeed with atleast its loyal user base.
However merchant problem will be the biggest barrier for Apple to cross. Many of the small businesses like food trucks, startups, etc. that rely on Square or Amazon or PayPal for accepting credit cards, won’t be able to use Apple Pay. Such systems aren’t equipped to support NFC and many merchants believe that cost of upgradation is quite high.
There are four major factors affecting success/failure of mobile wallets:
- Evaluating CurrentC w.r.t. the above mentioned factors, it would not be wrong to say that MCX would face challenges in user acceptance. Smartphone users would have to specifically download the CurrentC app or the retailers’ branded apps (fragmented experience). And educate the customers (not great at that). MCX would have an advantage in merchant acceptance for obvious reasons and big retailer brands already have positive credentials to attract customers.
- Apple Pay on the other hand, it seems it will hit the home run with respect to user acceptance and company credentials. Apple brand recall is at its strongest right now. Also, the large number of iPhone users would readily accept Apple’s payment solution. But merchant acceptance and solution cost is a question.