One-Year Old Apple Pay Faces Tough Competition

by CXOtoday News Desk    Oct 27, 2015

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Apple’s mobile wallet Apple Pay, which was supposed to revolutionize the mobile payment landscape, so much that its CEO Tim Cook called 2015 the “year of Apple Pay,” is already showing signs of slowing growth. The mobile-payments system, which marks its one-year anniversary this month, is in a crowded market with many players, including Google’s Android Pay, Samsung Pay and, now, a new challenger from JP Morgan Chase. 

A report by Phoenix Marketing International shows that US customers are no longer signing up for Apple Pay as much as they used to. At the end of September, only 14 percent of American households with credit cards had signed up for the service, up only three percentage points since February and indicating slowing growth for the payment option, it shows.  

Read more: Samsung’s M-Payment To Take On Apple Pay, Google Wallet

“A very rapid initial threshold was achieved by Apple Pay, and it is still growing but the growth rate has slowed down,” said Greg Weed, Phoenix Marketing’s director of card performance research, Reuters reported.

Another research shows that Apple Pay has failed to catch on with consumers, accounting for only 1 percent of all retail transactions in the U.S., according to researcher Aite Group. “The service, which allows users to pay for purchases by tapping their iPhone or Apple Watch on a device at cash registers has suffered from a lack of promotion and limited number of terminals available in stores. Plus Apple Pay is only available on newer iPhones,” it said.

“People don’t know why it is they’d use Apple Pay,” Jared Schrieber, CEO of InfoScout, a marketing research firm told Bloomberg. “They are satisfied with the current methods and they don’t know how Apple Pay works.”

When Apple entered the mobile payments market last year, it was relatively nascent. A similar feature had been available in Google Inc.’s smartphones through Wallet since 2011, yet adoption was anemic, according to Bloomberg Intelligence. However, expectations were very high from Apple, expectations and the company made it a point to tie up with banks, credit unions and numerous merchants for sustained growth and momentum.

Apple Pay vs. Others

Despite all these, competitors have followed as Samsung Pay and Google’s Android Pay were both introduced this year. The Phoenix research shows about 48 percent of Gen Xers, in their mid-30s to mid-50s, use Apple Pay, compared with 42 percent of millennials, aged 21 to 34. Among Apple Pay users, 86 percent have linked their credit cards to make a purchase, 49 percent consumers use their debit cards and 22 percent use different types of prepaid cards, the report showed.

A final blow to Apple’s growth may come from JP Morgan Chase launching its own smartphone payment platform in mid-2016, giving a tough competition to Apple, Google and Samsung.

Chase Pay will be based on CurrentC, a retailer-led mobile payment system that has largely been written off by Silicon Valley techies for its reliance on barcodes rather than the more sophisticated NFC (near-field communications) technology adopted by its competitors, according to reports. The payment method is compatible with a much larger number of smartphones. Users with phones incompatible with other payment systems could find their phones work with the Chase platform.

The research firms expect the growth of Apple Pay to further slow down in the next 2-3 years. While mobile payments are set for exponential growth with eMarketer predicting the total value of mobile payment transactions in the US will grow 210% in 2016, it is indeed worrisome that Apple Pay will see a slow growth.

Nonetheless, the good news for Apple is that emerging markets are upbeat on mobile payments, the tech major can tap into these markets and further differentiate its services to sustain the growth momentum.