Will Apple Pay Finally Make Mobile Payments A Reality For Retail?

VP site only Kobie Marketing head shotUnless you’ve been living under a rock, you’ve probably heard about (and possibly used) Apple’s new mobile wallet, Apple Pay, which launched last fall in the U.S. Apple Pay is an online and mobile wallet that allows consumers to upload up to eight credit cards and make payments at both online and brick-and-mortar retailers.

Apple Pay Is Positioned To Succeed Where Others Have Failed

Mobile wallets like Square and Google Wallet have been around for years but have never gained widespread consumer acceptance. So why is there so much hype around Apple Pay?

  1. Apple Pay has solved some security concerns that many consumers have around mobile payments by using NFC technology and a one-time use encrypted number.


  2. Since Apple Pay is an open network that can be accepted at any retailer that installs the software, consumers can avoid signing up with multiple wallet providers. Many of the successful mobile payment solutions, such as the Starbucks app, only work in a specific brand’s retail locations.  

  3. Transitioning to Apple Pay will likely be easy due to the existing level of consumer trust in Apple. iTunes already stores more than 800 million credit cards, which proves that consumers are comfortable sharing their payment information with Apple.

  4. Major retailers have already signed commitments to install the technology to accept Apple Pay. Nike, McDonald’s, Walgreens, Panera, Whole Foods, Subway, Walgreens, and Macy’s are among some of the retailers who have installed software to accept Apple Pay.

  5. Apple Pay is being supported by the big three credit issuers and major banks.  Visa, MasterCard and American Express have all signed on, as well as Bank of America, Capital One, Citi, Chase, US Bank and Wells Fargo, among others. As of late January 2015, nearly 800 banks and credit unions were signed up to offer Apple Pay to their customers.  

  6. Apple Pay can close the loop in terms of reporting to retailers with iBeacon software. Most mobile wallets rely solely on Bluetooth, which means that it needs to be turned on and it is difficult to track which offer prompted what action. Apple Pay will be the only wallet to combine Bluetooth, NFC and iBeacon technology. Although, other mobile wallets and third-party vendors are quickly developing technology to connect them. iBeacon is a signal-emitting technology that allows retailers to push real-time, geo-centric offers to consumers in physical stores. Retailers will be able to send geo-targeted offers via iPhones and Apple Watches and then track transactions through Apple Pay. The combination of Bluetooth, NRF and iBeacon will allow retailers to track vital data about the in-store customer journey, such as dwell time.   

Widespread Adoption Will Take Time, But Perhaps Not As Long As Anticipated

Apple Pay is quickly gaining acceptance in the market. In its recent Q1 earnings call, Apple CEO Tim Cook announced that Apple Pay “makes up two out of three dollars spent on purchases using contactless payments across the three major U.S. card networks.” And according to ITG Investment Research, upwards of 30% of consumers on the new iPhone have activated Apple Pay and about 5% of all their transactions are made through Apple Pay. Customer engagement is high with about 60% of users having used the service this past November. All that said, the race for mobile wallet domination is not over and there are several reasons why it will take time to reach the masses.

First, widespread adoption will be limited since Apple Pay isn’t available on older iPhone models and Android phones. Apple Pay is only available on the iPhone 6 as of its launch and will be available on the Apple Watch sometime this year (the only Apple products that use NFC technology). Additionally, it will likely take time for iPhone 6 and Apple Watch users to adapt to Apple Pay.

Second, while many retailers accept or are planning to accept Apple Pay, some notable brands are holding out for a different solution. Top-tier retailers like Walmart, Best Buy and 7-Eleven are putting their faith in a solution by MCX, which will launch sometime in 2015 and work with debit cards. Lastly, local mom and pop stores probably can’t afford to install the Apple Pay software and won’t adopt it anytime soon.

Apple Pay’s Potential Impact On Retail Loyalty

Despite these obstacles, it is clear that Apple has the marketing muscle to make an impact and that in some way, shape or form, mobile wallets are coming. So what might this mean for retail loyalty programs? There are some potential positives:

  1. Mobile wallets may enable better tracking of purchases for loyalty programs.  Assuming loyalty numbers can be loaded into the mobile wallet, potentially all transactions could be linked to loyalty.

  2. Mobile wallets may allow for better integration between retail credit loyalty programs and tender neutral programs by integrating them with one number in the wallet.

  3. Mobile wallets may make consumers more comfortable with sharing their customer data, knowing it is stored with a trusted third party versus the retailer.

At this point there is uncertainty around mobile wallets that could potentially be harmful to retail loyalty programs. A few unanswered questions:

  1. What will the business model look like? The banks will be sharing the interchange fee with Apple, but will mobile wallets like Apple Pay charge retailers for loyalty integration?  The answer is likely “yes,” but time will tell when and how much.

  2. How will Apple treat the customer data? As of now, Apple is supportive more of the consumer’s choices versus the retailers.

  3. If a retailer refuses to pay certain fees, will Apple push the customer to a competitor?

  4. Will Apple choose to launch its own coalition loyalty program and disenfranchise retailers from their customers altogether?

Despite all of the unknowns surrounding Apple Pay, there’s a good sign Apple may be zeroing in on loyalty — a job posting last fall for Apple was seeking a program manager for loyalty tasked with “shaping the future of loyalty programs.” In typical Apple fashion, Tim Cook has also eluded to new functionality and an exciting roadmap for the future.  I’m sure we’ll all be keeping a close eye on this in the coming months and years.


Erica Thompson Moran is the Senior Retail Marketing Expert at Kobie Marketing. Moran has more than 20 years of experience in retail marketing, specializing in CRM, direct marketing, loyalty programs, e-Commerce, social and online marketing, and credit card marketing. In her current role, Moran advises retailers on Loyalty Programs, CRM strategy and Ecommerce Implementations.  Her most recent role was Senior Vice President of Marketing for Stride Rite.In that role, Moran was responsible for providing strategic direction around Stride Rite’s global branding initiatives, including advertising, marketing communications/PR, retail and wholesale strategy, CRM, e-Commerce, and digital marketing. Moran previously held senior-level marketing positions at PetSmart, Tweeter Home Entertainment, New York & Company and HSN. She also spent seven years at the Walt Disney Company in various business strategy and marketing roles, and is a member of the Global Retail Marketing.  


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