Slow spread of Apple Pay The secret is patience

 

It took longer than expected for the iPhone to become a wallet

In Silicon Valley, home to companies that want to move fast and creatively disrupt, patience is not a particularly popular virtue.

 There was no disruption on the day Apple announced its new service "Apple Pay" in 2014.  If the quality of destruction was measured by its speed, the company's flashy innovations would have been disappointing.  Apple Pay's spread was slower than expected, and I thought it was ridiculous to say that Apple Pay would eliminate the need for a wallet.  Wall Street analysts and iPhone users alike were skeptical in the years that followed.  The credit card user experience didn't seem like an issue for Apple to fix either.

 The Apple Pay gamble is a very strange one right now for a hit-oriented economic sector, but it seems to be slowly paying off over time.

Apple has been thoroughly analyzed and has drawn enough lessons to open its own business school.  But the example of Apple Pay shows that patience is a competitive advantage for companies that know how to use it.

 Only time can disrupt certain habits of human behavior, and a market capitalization of trillions of dollars makes it possible to buy that time.  Not all companies can afford to play games endlessly, a luxury that only some of the world's most well-funded companies can afford.

 According to a survey by Loop Ventures, 10% of iPhones were set up to use Apple Pay in 2016 and 20% in 2017.  Back then, most people were happy enough to pay with credit cards and wallets.  Penetration almost doubled again in 2018 and reached 50% in 2020.  It is currently around 75% and is gradually approaching 100%.  Of course, not all activated accounts are still in use.

 "What has changed?"  it's us  Apple executives remained confident about the future even when things weren't so optimistic.  Seeing the acceptance of contactless payments in other parts of the world, he knew the U.S. was several years behind.

In order for iPhone users to be able to use Apple Pay, it is necessary to build a technical infrastructure.  We also have to wait for the world to get used to the changes.  Apple's data shows that customers who have tried it at least once love Apple Pay.  “People love Apple Pay,” Loop Ventures analyst Gene Munster said in a recent interview.  Apple just needed to get more customers to use Apple Pay.  Furthermore, the company's persistent guidance paid off.

Apple says 90% of retailers nationwide now accept Apple Pay.  When Apple Pay launched, 3% of retailers accepted contactless payments.

 The more places that accept Apple Pay, the more valuable Apple Pay will be, and the more people will register their credit or debit cards in the "Wallet" app.

 In addition to being able to use Apple Pay to order online shopping and send money to friends, it can also be used for shopping at physical stores by holding the smartphone near the contactless reader.  Munster estimates that Apple receives less than 1% of its revenue from bank fees for using Apple Pay, but billions of dollars because it makes so much money from iPhone sales. is within the range of rounding error.  Apple Pay's raison d'etre is to enhance the iPhone user experience.

 　Apple Pay's activation rate is beginning to show movements similar to the pattern often seen during the spread of technology.  This suggests that Apple's currently small share could grow significantly, along with the contactless payments market.  Nearly 20% of all face-to-face Visa transactions in the U.S. are spent on these contactless payments, but more than 25% in major cities.  It reached 30% in the Bay Area and 45% in New York.  Apple Pay is also the number one payment app used by teens, according to investment firm Piper Sandler.  If teens and cities can fall, it's like having a whole country.

For most of Apple Pay's existence, the rhetoric of Apple executives didn't line up with reality.  CEO Tim Cook once predicted that 2015 would be "the year of Apple Pay."  Apple Pay will replace cash in 2016, he said.  In 2018, he admitted that mobile payments had unexpectedly taken off.  Senior vice president Eddie Cue said five years ago that ultimately it doesn't matter if the goal is several years away.

 "Apple is patient but not stubborn."  For example, the speaker "HomePod" decided to be abolished three years after its release.  No amount of patience could have saved the iPod.

 But in the case of Apple Pay, time was on Apple's side.  The company revealed that its Apple Pay revenue doubled in 2019.  “Apple Pay’s growth has been incredible,” Cook said on the company’s earnings call in January.

 Apple Pay became a foothold for Apple to further expand its business.  The company entered the world of finance in 2019 by partnering with Goldman Sachs on the Apple Card.  In addition, it announced that it will start a post-payment service “BNPL (Buy Now Pay Rate)” in the United States within 2022, indicating its intention to enter the market in earnest.  The company's ambitions are under scrutiny from regulators.  European antitrust regulators recently accused Apple of abusing its market power to favor Apple Pay.  Apple has said it is cooperating with the investigation.

Apple hopes to eventually let the wallet feature store everything from driver's licenses to insurance cards, but the company says the process of transitioning from physical to virtual won't happen overnight. I have learned.  Changes only happen over decades.  “There really is a chicken-and-egg problem with payments,” said Bernstein analyst Hershita Rawat.  “Consumer habits are slow to change. It takes years for stores to accept [mobile payments],” she said.

 The consumer habits that will take the longest to change also happen to be the habits that pay the most.  Gerard Dutoit, a partner at Bain & Co., said cash registers are the biggest transaction in the U.S. mobile payments business.  Apple has the largest share of digital payments in brick-and-mortar stores, leading its rivals despite a narrowing gap.

 However, Apple Pay's rivals are not limited to CashApp, PayPal, Google, and Samsung.  The convenience of credit cards is another rival.

 "And credit cards are still leading."  Apple executives say Apple Pay's enhanced security features will help create a better consumer experience, but there's still no reason why people should choose mobile payments over credit cards.

 Over the past few weeks, I have used my smartphone to pay as much as possible.  However, there are still many places where smartphone payment is not possible.  Restaurants have been slow to adopt the technology needed for Apple Pay.  Gas stations are reluctant to invest in upgrading their tankers.  Walmart has prioritized its own mobile payment service, making it particularly difficult to get help from other retailers.

 Success for Apple Pay looks different now than it did eight years ago.  Eight years from now it will be different.