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Apple, Google and others look to goose mobile payments

Matt Hamblen | June 8, 2015
Apple's expected to add a user rewards element to Apple Pay at WWDC, which begins Monday.

"Adding rewards to mobile payments is certainly helpful, but whether it is enough to get people fantastically crazy about this stuff, we'll have to see," Stofega said.

An April survey by Kantar WorldWide found that fully 76% of users of iPhone 6 and iPhone 6 Plus smartphones (the only phones that include NFC) hadn't tried Apple Pay. On the other hand, the survey found only 2.6% didn't use Apple Pay because they didn't trust it, while only 4.1% said they didn't use it because they didn't understand how it works.

"People don't use Apple Pay and other services because they don't need to; their credit card works just fine," said Carolina Milanesi, chief of research at Kantar.

A separate survey of 1,000 iPhone 6 users done in March by found 15% had tried Apple Pay, but only 6% said they continued to use it. Some analysts have linked that fall-off to the shortage of stores offering the service.

If Apple links reward cards to payment options next week, "that will be interesting, but not much of a driver of mobile payments in my view," Milanesi said. "But some kind of cash-back or point system, similar to how credit cards work, will be more appealing to users who are more reticent about trying out the technology."

Mobile payments are inevitable
Patrick Moorhead, an analyst at Moor Insights & Strategy, said Apple Pay will probably catch on in the coming year in greater numbers for reasons beyond any new rewards capabilities.

"I've watched year after year the failures of mobile payments, but I'm positive on Apple Pay because it provides ease of use with the experience and offers users privacy that Apple won't resell your personal information," Moorhead said. "Apple doesn't take personal data and use it like Google does."

Another analyst, Garter's Avivah Litan, said the real growth with mobile payments in the U.S. will come when retailers of all sizes get on board in greater numbers than they have so far. Apple's biggest focus has been to reassure consumers about its service and working with banks and credit card companies -- and less so, merchants, she said.

"Apple Pay is very consumer friendly, but that doesn't necessarily drive out a new payment system," he said. "It's really about the merchants. The mobile payment area is still really small and it's a major inflection point to install equipment in stores to support smartphones to make payments, so you've got to find a big critical mass of merchants who can benefit. It doesn't seem like Apple's found that critical mass yet."

Litan argued that merchants generally want to avoid paying fees of 2% to 5% per transaction to credit card companies and the banks behind the cards, which still happens with Apple Pay and its use with Visa, MasterCard, American Express and others. "Apple's system is consumer friendly and is tight from a security and privacy standpoint and that's why they are aligned with Visa and MasterCard, who are also consumer-driven. But the banks and card companies are not aligned with the merchants," Litan said.


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