The unpleasant truth about Apple Pay
The author of the material cites data from surveys and studies showing that despite the hype around the launch of Apple Pay, the success of the further development of the payment system is questionable.
The launch of Apple Pay in mobile payments has caused a stir "around the world," and the PYMNTS.com publication has tried to study how consumers are responding.
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As part of the quarterly research conducted since November 2014 in conjunction with InfoScout, the publication not only surveyed consumers what they could do , but also noted that consumers with suitable phones who made purchases in the right stores did at the time of the transaction. The survey organizers wanted to know whether Apple Pay users used this transaction or not. Each quarter, representatives of the publication interviewed a sufficient number of consumers to make reliable conclusions: about 4,000 consumers every quarter, and slightly less than 8,000 consumers in March 2017. The organizers reported on the results every time they conducted these studies - and they conducted them a total of eight times. In between, representatives of the publication have written many comments that highlight the factors hindering the use of Apple Pay.
Representatives of the publication with confidence reported two years ago that the spread of Apple Pay was very slow - and now it seems to be showing a negative pace. And such a strategy based on a device / technology (rather than an application / cloud) throughout the United States created obstacles for consumers and merchants from the very beginning.
The insufficient number of users of mobile phones and devices, as well as the insufficient number of places where the system is used, has created a problem of enormous proportions that has proved difficult to cope with even the largest technology company in the world. Critical mass and scale is the driving force behind payment innovations, and Apple Pay did not develop one or the other.
But the main problem with the launch of Apple Pay was not only that. Her inability to solve the urgent problem of consumers in the market, where payment with a plastic card works fine every time a consumer enters a store and pays for goods at the checkout through the terminal, became her Achilles heel.
In the book Matchmakers: The Economics of Multisided Platforms , published in May 2016, there is even a whole chapter introducing readers to the great launch failure of the platform and using Apple Pay as an example.
After the initial enthusiasm of the pioneers died down, the spread / use of Apple Pay, which has accelerated since March 2015, began.
And now everything has changed.
The Wall Street Journal in its article quoted Eddie Kew, Apple’s first vice president in charge of the company's services, including Apple Pay. He said that Apple Pay "will eventually replace cash and debit and credit cards and become the main payment system."
However, Cue did not announce the figures - the number of users, the share of expenses, transactions and, most importantly, the volume in dollars - that could justify his statement. In addition to the vague "the number of users and transactions increased five and six times," which were repeatedly met in the income reports, there were never specific figures published by Apple regarding Apple Pay.
The survey organizers updated some of their approximate calculations on the distribution, use and share of costs - and that's what they did. Representatives of the publication recognize that the data is very approximate and would be much more accurate if Apple published real data.
Well, let's get started.
In the US, there are 207.1 million smartphone users, and 44.5% of these users (or 92.2 million) own the iPhone. Of these, 74.1% have a mobile phone that supports Apple Pay (6 and above). The Apple Pay survey says that 21.9% of this number of iPhone users actually tried Apple Pay, so the number of iPhone users who have tried Apple Pay at least once is 15.0 million.
As for regular users, again from the study, it is known that 18.4% used it more than once. Thus, the number of regular Apple Pay users who use this payment system in physical stores is 12.6 million.
So, there are a total of 12.6 million active users after 30 months of market presence.
The survey organizers made several assumptions:
1. 44.5% of Americans have iPhones, and 74.1% of them have iPhones that support Apple Pay, which means that 33% of US residents have a suitable iPhone. Multiply this by $ 420 billion in sales and get $ 137 billion in potential sales for Apple Pay users.
2. According to the survey organizers, Apple Pay is used in 4.03% of all transactions. This means that Apple Pay accounts for $ 5.5 billion worth of transactions, excluding cars and gas stations. This is about 0.10% of all retail expenses.
Many assumptions can be made, but regardless of how to interpret data reflecting 2.5 years of constant consumer surveys on their use of Apple Pay, using any number of assumptions, Apple Pay’s share of retail spending in any case seems small.
If it were more, then more sellers would make an effort to accept Apple Pay and encourage consumers to use it. Various large vendors say that, given the rare use and low cost of Apple Pay, they are not interested in making it a priority, and / or see no reason to move it to the detriment of other methods, which could encourage its use. and increase its value to consumers and merchants.
If Apple Pay’s share of expenses was greater, this would be known - because Apple itself would have told about it. In late March, Apple published data on the success of the Beats , and in December, Eddie Q told the media that the number of Apple Music users had already exceeded 20 million.
As soon as it comes to Apple Pay and Apple Pay usage data, only silence is heard. Apple Pay data seems to be Apple's most carefully guarded secret since the invention of the iPhone.
In an interview with WSJ, Q was asked: “Does it matter when [Apple Pay] succeeds — two years, three years, or five years?” He replied: “Ultimately, no.”
As any person who studies launching platforms understands, time really matters, especially in a dynamic payment industry - where time is probably one of the most important currencies. The longer it “swings”, the greater the risk that someone or something else will do it faster - to the detriment of you.
Especially when you have been on the market for almost three years and have practically not moved from the dead center. And when you try to convince banks not to leave you and keep paying. And convince the investor community that you will receive revenue from services that is based on the popularity of Apple Pay.
And when the traffic in the physical stores that you bet on does not meet expectations, while online payments are taking off, including using apps to pay for goods that consumers usually buy in physical stores. While Apple Pay was stubbornly introduced in stores, cloud apps were introduced in those segments where shoppers entered physical stores and used the cloud to offer consumers the opportunity to save time by ordering and paying for goods in advance. And accepting online payment.
And when other players have used these 30 months to create a consumer base that they can offer to sellers who need buyers and profits.
When online payment systems and cloud-based mobile wallets reveal data on the number of their users, it turns out that this number far exceeds the number of Apple Pay users.
And when consumers, including pioneers who have ceased to use it regularly, offer other options in other channels where they have already formed buying habits over the past 30 months, and Apple must now try very hard to get them back.
And when the payments ecosystem sees that Apple, based on its experience with Apple Pay, has already lost some of its bargaining power from a position of strength that it had three years ago.
Back in 2014, Apple could require 15 basis points from banks that were hoping to master the fast-growing innovative Apple Pay payment system. Now large banks have a strong enough argument to cancel a deal with Apple, and even ask Apple to pay them a few basic points for providing access to their cardholders.
The inconvenient truth about Apple Pay is that if Apple does play a long-range game, it may have to pay for it. And also give sellers an incentive to promote it while things are not going very well.
The next three years of Apple Pay payments are coming - this time without fuss.
The launch of Apple Pay in mobile payments has caused a stir "around the world," and the PYMNTS.com publication has tried to study how consumers are responding.
')
As part of the quarterly research conducted since November 2014 in conjunction with InfoScout, the publication not only surveyed consumers what they could do , but also noted that consumers with suitable phones who made purchases in the right stores did at the time of the transaction. The survey organizers wanted to know whether Apple Pay users used this transaction or not. Each quarter, representatives of the publication interviewed a sufficient number of consumers to make reliable conclusions: about 4,000 consumers every quarter, and slightly less than 8,000 consumers in March 2017. The organizers reported on the results every time they conducted these studies - and they conducted them a total of eight times. In between, representatives of the publication have written many comments that highlight the factors hindering the use of Apple Pay.
Representatives of the publication with confidence reported two years ago that the spread of Apple Pay was very slow - and now it seems to be showing a negative pace. And such a strategy based on a device / technology (rather than an application / cloud) throughout the United States created obstacles for consumers and merchants from the very beginning.
The insufficient number of users of mobile phones and devices, as well as the insufficient number of places where the system is used, has created a problem of enormous proportions that has proved difficult to cope with even the largest technology company in the world. Critical mass and scale is the driving force behind payment innovations, and Apple Pay did not develop one or the other.
But the main problem with the launch of Apple Pay was not only that. Her inability to solve the urgent problem of consumers in the market, where payment with a plastic card works fine every time a consumer enters a store and pays for goods at the checkout through the terminal, became her Achilles heel.
In the book Matchmakers: The Economics of Multisided Platforms , published in May 2016, there is even a whole chapter introducing readers to the great launch failure of the platform and using Apple Pay as an example.
After the initial enthusiasm of the pioneers died down, the spread / use of Apple Pay, which has accelerated since March 2015, began.
And now everything has changed.
Inconvenient truth: Apple Pay’s share of spending is low
The Wall Street Journal in its article quoted Eddie Kew, Apple’s first vice president in charge of the company's services, including Apple Pay. He said that Apple Pay "will eventually replace cash and debit and credit cards and become the main payment system."
However, Cue did not announce the figures - the number of users, the share of expenses, transactions and, most importantly, the volume in dollars - that could justify his statement. In addition to the vague "the number of users and transactions increased five and six times," which were repeatedly met in the income reports, there were never specific figures published by Apple regarding Apple Pay.
The survey organizers updated some of their approximate calculations on the distribution, use and share of costs - and that's what they did. Representatives of the publication recognize that the data is very approximate and would be much more accurate if Apple published real data.
Well, let's get started.
Number of Apple Pay users
In the US, there are 207.1 million smartphone users, and 44.5% of these users (or 92.2 million) own the iPhone. Of these, 74.1% have a mobile phone that supports Apple Pay (6 and above). The Apple Pay survey says that 21.9% of this number of iPhone users actually tried Apple Pay, so the number of iPhone users who have tried Apple Pay at least once is 15.0 million.
As for regular users, again from the study, it is known that 18.4% used it more than once. Thus, the number of regular Apple Pay users who use this payment system in physical stores is 12.6 million.
So, there are a total of 12.6 million active users after 30 months of market presence.
The share of expenses attributable to Apple Pay
The survey organizers made several assumptions:
- It is known that the annual sales of stores, which, according to Apple's report, accept Apple Pay, is $ 420 billion. This figure is due to the assumption that $ 392 billion was received from stores that are part of the hundred largest retailers, the rest is based on the remaining costs attributable to other small sellers.
- It is estimated that people using the Apple Pay app in these stores spend on average as much as other consumers.
- Using the figure of $ 420 billion, you can calculate:
1. 44.5% of Americans have iPhones, and 74.1% of them have iPhones that support Apple Pay, which means that 33% of US residents have a suitable iPhone. Multiply this by $ 420 billion in sales and get $ 137 billion in potential sales for Apple Pay users.
2. According to the survey organizers, Apple Pay is used in 4.03% of all transactions. This means that Apple Pay accounts for $ 5.5 billion worth of transactions, excluding cars and gas stations. This is about 0.10% of all retail expenses.
| Total sales, according to statistics | Apple Pay share | |
|---|---|---|
| Estimated Share of Apple Pay Transactions | ||
| Retail and Food (except for cars and gasoline) | 3,969 | 0.14% |
| Retail and Food (except for cars) | 4.374 | 0.13% |
| Retail and Food Services | 5,504 | 0.10% |
Many assumptions can be made, but regardless of how to interpret data reflecting 2.5 years of constant consumer surveys on their use of Apple Pay, using any number of assumptions, Apple Pay’s share of retail spending in any case seems small.
If it were more, then more sellers would make an effort to accept Apple Pay and encourage consumers to use it. Various large vendors say that, given the rare use and low cost of Apple Pay, they are not interested in making it a priority, and / or see no reason to move it to the detriment of other methods, which could encourage its use. and increase its value to consumers and merchants.
If Apple Pay’s share of expenses was greater, this would be known - because Apple itself would have told about it. In late March, Apple published data on the success of the Beats , and in December, Eddie Q told the media that the number of Apple Music users had already exceeded 20 million.
As soon as it comes to Apple Pay and Apple Pay usage data, only silence is heard. Apple Pay data seems to be Apple's most carefully guarded secret since the invention of the iPhone.
Inconvenient truth: time is the most important currency
In an interview with WSJ, Q was asked: “Does it matter when [Apple Pay] succeeds — two years, three years, or five years?” He replied: “Ultimately, no.”
As any person who studies launching platforms understands, time really matters, especially in a dynamic payment industry - where time is probably one of the most important currencies. The longer it “swings”, the greater the risk that someone or something else will do it faster - to the detriment of you.
Especially when you have been on the market for almost three years and have practically not moved from the dead center. And when you try to convince banks not to leave you and keep paying. And convince the investor community that you will receive revenue from services that is based on the popularity of Apple Pay.
And when the traffic in the physical stores that you bet on does not meet expectations, while online payments are taking off, including using apps to pay for goods that consumers usually buy in physical stores. While Apple Pay was stubbornly introduced in stores, cloud apps were introduced in those segments where shoppers entered physical stores and used the cloud to offer consumers the opportunity to save time by ordering and paying for goods in advance. And accepting online payment.
And when other players have used these 30 months to create a consumer base that they can offer to sellers who need buyers and profits.
When online payment systems and cloud-based mobile wallets reveal data on the number of their users, it turns out that this number far exceeds the number of Apple Pay users.
And when consumers, including pioneers who have ceased to use it regularly, offer other options in other channels where they have already formed buying habits over the past 30 months, and Apple must now try very hard to get them back.
And when the payments ecosystem sees that Apple, based on its experience with Apple Pay, has already lost some of its bargaining power from a position of strength that it had three years ago.
Back in 2014, Apple could require 15 basis points from banks that were hoping to master the fast-growing innovative Apple Pay payment system. Now large banks have a strong enough argument to cancel a deal with Apple, and even ask Apple to pay them a few basic points for providing access to their cardholders.
The inconvenient truth about Apple Pay is that if Apple does play a long-range game, it may have to pay for it. And also give sellers an incentive to promote it while things are not going very well.
The next three years of Apple Pay payments are coming - this time without fuss.
Source: https://habr.com/ru/post/322794/
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