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BirdsEye View

how apple pay's winning combination of innovation and patience paid off

 Apple Pay has been nowhere for ages, practically since inception.  There have been no reports of progress, successes, improved penetration and usage, since inception.  So… When did everyone start using Apple Pay?  More than 75% of smartphone and smartwatch owners now use their devices to pay for goods, making up more than 92% of all mobile payments, while Android Pay or Samsung Pay have clearly failed to gain traction.  When did this happen and why aren’t we talking about it?  The implications to banking, particularly consumer banking, are profound!

In 2014, when Tim Cook said at a presentation that Apple Pay would make the wallet obsolete, very few people took him seriously. How wrong they were…

The Apple Wallet is not simply a means of payment. It has become the “go-to” place for storing tickets, boarding passes, train tickets, driving licenses, important documents, loyalty cards, and a whole host of other things.  It is a simple, reliable and easily retrievable storage spot for all the things you don’t want to lose on your phone.  This is a mission-critical functionality that propelled Apple Pay to the first-in-wallet of all wallets position, a dominance that is unlikely to be unseated without major technological innovations.

Interestingly, nearly everything that can be done with Apple’s wallet can also be done with the myriad wallets that appear in a search in the Play Market.  And yet, only 5% of Android users have even tried a virtual wallet even once, and less than 1% use it, despite the convenience. Samsung Pay? About the same: 5.1% of users have tried it, and less than 1.4% employ it regularly.

What does this say about Apple’s adoption process? Apple proved that patience.is a virtue  Paying in cash has been a deeply rooted practice that is gradually being replaced by another, equally deeply rooted habit, that of taking a debit or credit card out of the wallet. Even that initial transition hasn’t been complete yet, in part due to merchants foot-dragging on shofting their own infrastructure to accommodate this move.  Square, the company, has changed it all.  That, couples with NFC readers being integrated into the fraud-prevention process, gave a boost to the behavior shift away from cash and into the card pattern.  Making the leap to using smartphones or smartwatches is the next step.  It will take time and needs to be done slowly.  Only early adopters are fully committed to the Apple Pay solution, but their number increases daily. 

Consider the typical wallet.  A representative wallet contains two debit cards, two credit cards, seven airline, hotel and store loyalty cards, a Covid vaccination card, and a couple of access cards to some services.  All those can be safely and retrievably stored in the Apple Wallet, along with boarding passes and train tickets. The app typically occupies a space on the first visible screen of most smartphones, as well as being accessible with a double tap on the right button.  Many users also have it on their smartwatch.  It is safe and reliable, and is by far my most common means of payment for those who use it.  For me personally it’s my “go to” payment vehicle.  I only pull the physical card out when the payment device fails to accept my virtual card.  For many users the app has replaced the physical wallet to the point that one often forgets the wallet at home. It’s an app that has pretty much replaced my wallet, in fact I often leave it at home. Cash has been rendered truly obsolete for heavy Apple Pay users, who only take cash if going to a hotel and want to give a tip, or something like that.

What has Apple done that other companies like Google or Samsung have failed to do? Apple took its time and used its muscle to persuade 90% of stores to accept Apple Pay; 75% of its users having activated it; and the vast majority of mobile payments are made with it. Apple Pay is quickly becoming the payment system of the future. Innovation? Undoubtedly. Usability? Surely. But above all, patience, a lot of patience.

The implications to our industry are indeed profound. No bank understandably has the Apple muscle, but too many lack its patience.  Quarterly earnings pressures on public companies notwithstanding, patience is a virtue when innovation and strategy execution are concerned.  Many a CEO is hard-pressed to accept the longer-term benefits of investments in the digital world, yet those who have made massive investments in the space have communicated meaningful and measurable payback over time.  Chase is an excellent example of such a company, which now touts huge reductions in operating costs across the board due to digital investments made a decade ago.  CX implications are even greater for key constituencies, and additional benefits in the fraud prevention and operations workstreams are abound.  

Most banks need the consumer/small business segment to some extent as an important funding mechanism to their commercial loans and other businesses.  All are experiencing profitability pressures, particularly in the consumer segment, due to lack of sufficient and effective investments in the digitization of the experience.  The Apple Pay story clearly demonstrates how the long view can make a dramatic difference in both competitive position and financial results. It is a difficult posture to take, especially for public companies, but it is an imperative for long-term prosperity.