Study: Apple Pay at 9% adoption in US, lags far behind PayPal and traditional payment meth...
A new study finds Apple Pay adoption is rapidly growing in a number of major international markets including China, but it and other mobile payments services continue to languish in the U.S.
According to new statistics from management consultancy Bain, some 80% of Chinese consumers used some form of smartphone payments service last year, far higher than a U.S. adoption rate of 10%, reports CNBC.
Broken down by service, the Chinese market is dominated by local systems like WeChat Pay and AliPay, both of which enjoyed over 80% adoption rates in 2018. Cash, bank cards, credit cards and bank apps follow, with Apple Pay listed as the most-used foreign service with 17% adoption.
Gerard du Toit, partner and head of Bain's banking and payments sector, notes countries like China and India are ripe for penetration due to their reliance on cash.
"China and India have been very cash-based economies -- that has a pretty high hassle and friction factor," du Toit said. "Mobile payment is a dramatic improvement versus having to manage a whole bunch of cash."
Whereas Alibaba and Tencent offered attractive alternatives to traditional payments in a bid for Chinese consumer favor, India pushed the use of mobile payments to dissuade unrecorded cash transactions and thus reap consumption taxes.
The story is different in the U.S., where Apple Pay has a 9% adoption rate. By comparison, PayPal is used by 44% of American consumers, while credit card and cash boast respective adoption rates of 80% and 79%.
There is little incentive for consumers to ditch credit cards, the top form of payment in America, for a mobile payment alternative, du Toit notes. In some cases, swiping or inserting a credit card into a point of sale terminal is easier than pulling out an iPhone, unlocking it and tapping it on an NFC reader.
"A big driver of mobile adoption is just how big an improvement is it," du Toit said. "When it comes to the U.S., there is a good enough solution there already."
Integration is another issue. Credit cards are accepted by nearly all U.S. merchants and cash is, obviously, ubiquitous. Brick-and-mortar stores are beginning to adopt touchless solutions like Apple Pay, but the process often requires the purchase and installation of new hardware, as well as acceptance of an operator's terms.
The report goes on to note that consumers are unlikely to stray from the rewards that have become part and parcel of the credit card experience. Mobile services are working to integrate similar offers. The Starbucks app, which offers users credits that go toward free food and drink, is one example. According to eMarketer, Starbucks' system is the most used app in the U.S. with 23.4 million users, the report said. Apple Pay is a close second with 22 million users and is followed by Google Pay's 11.1 million adopters.
Apple is working to build out its rewards program with the recently released Apple Card, a branded credit card offered in partnership with Goldman Sachs. Through the Daily Cash system, users buying goods get a percentage of the purchase price back in cash, money that is automatically loaded onto their Apple Cash card for use or transfer to a bank account. Buying products and services from Apple nets 3% Daily Cash, Apple Pay transactions garner 2% cash back and all other purchases rate 1% back.
"The physical Apple card is going to drive liquidity into the mobile app, Apple Pay," said CB Insights senior analyst Arieh Levi. "That's not the only reason Apple is launching the card, but it's certainly a piece of it driving money to other parts of their ecosystem."
Apple CEO Tim Cook during the company's most recent earnings call in July said Apple Pay is seeing triple-digit growth around the world, with the service processing one billion transactions per month. The latter figure represents a two-fold increase from the same time last year.
According to new statistics from management consultancy Bain, some 80% of Chinese consumers used some form of smartphone payments service last year, far higher than a U.S. adoption rate of 10%, reports CNBC.
Broken down by service, the Chinese market is dominated by local systems like WeChat Pay and AliPay, both of which enjoyed over 80% adoption rates in 2018. Cash, bank cards, credit cards and bank apps follow, with Apple Pay listed as the most-used foreign service with 17% adoption.
Gerard du Toit, partner and head of Bain's banking and payments sector, notes countries like China and India are ripe for penetration due to their reliance on cash.
"China and India have been very cash-based economies -- that has a pretty high hassle and friction factor," du Toit said. "Mobile payment is a dramatic improvement versus having to manage a whole bunch of cash."
Whereas Alibaba and Tencent offered attractive alternatives to traditional payments in a bid for Chinese consumer favor, India pushed the use of mobile payments to dissuade unrecorded cash transactions and thus reap consumption taxes.
The story is different in the U.S., where Apple Pay has a 9% adoption rate. By comparison, PayPal is used by 44% of American consumers, while credit card and cash boast respective adoption rates of 80% and 79%.
There is little incentive for consumers to ditch credit cards, the top form of payment in America, for a mobile payment alternative, du Toit notes. In some cases, swiping or inserting a credit card into a point of sale terminal is easier than pulling out an iPhone, unlocking it and tapping it on an NFC reader.
"A big driver of mobile adoption is just how big an improvement is it," du Toit said. "When it comes to the U.S., there is a good enough solution there already."
Integration is another issue. Credit cards are accepted by nearly all U.S. merchants and cash is, obviously, ubiquitous. Brick-and-mortar stores are beginning to adopt touchless solutions like Apple Pay, but the process often requires the purchase and installation of new hardware, as well as acceptance of an operator's terms.
The report goes on to note that consumers are unlikely to stray from the rewards that have become part and parcel of the credit card experience. Mobile services are working to integrate similar offers. The Starbucks app, which offers users credits that go toward free food and drink, is one example. According to eMarketer, Starbucks' system is the most used app in the U.S. with 23.4 million users, the report said. Apple Pay is a close second with 22 million users and is followed by Google Pay's 11.1 million adopters.
Apple is working to build out its rewards program with the recently released Apple Card, a branded credit card offered in partnership with Goldman Sachs. Through the Daily Cash system, users buying goods get a percentage of the purchase price back in cash, money that is automatically loaded onto their Apple Cash card for use or transfer to a bank account. Buying products and services from Apple nets 3% Daily Cash, Apple Pay transactions garner 2% cash back and all other purchases rate 1% back.
"The physical Apple card is going to drive liquidity into the mobile app, Apple Pay," said CB Insights senior analyst Arieh Levi. "That's not the only reason Apple is launching the card, but it's certainly a piece of it driving money to other parts of their ecosystem."
Apple CEO Tim Cook during the company's most recent earnings call in July said Apple Pay is seeing triple-digit growth around the world, with the service processing one billion transactions per month. The latter figure represents a two-fold increase from the same time last year.
Comments
WTF, does this guy have any clue on how Apple Pay works? Apple pay is linked to a credit card. You are not ditching anything. Pulling a wallet then the card out of your pocket then sliding it into the reader is not easier than pulling out a phone and tapping it on the reader. That's another joke. And you don't have to unlock the phone, just double tap on a button.
I wish there was a better system of identifying terminals. I don’t mind asking if a store has it, but my wife will not touch Apple Pay until acceptance is ubiquitous because asking would be very annoying to her.
One of the most annoying things is a place which accepts ApplePay and then I have to enter my PIN and interact with the terminal. As if a PIN is more secure than my facial scan... People running businesses don’t even get ApplePay.
When I was in the UK more places accepted it and did it properly.
Absolutely ridiculous to think pulling a card from your wallet is easier than tapping your iPhone (or Apple Watch). This is before you consider the fact Apple Pay is actually more secure than using your card.
I guess we’re lucky up here in Canada. Almost everyone accepts tap & pay (which means they accept Apple Pay by default). Two big holdouts are Home Depot and Walmart, which is why I refuse to shop there.
I estimate 95% of my purchases are Apple Pay. The other 5% are the few stores that don’t accept tap or for purchases over $100.
Only someone who has never used it could write this statement! Total B.S, it is quite the opposite!! And, as already stated, only steps are:
1) get your iPhone or Watch out and place near NFC reader
2) use touch or Face ID and that’s it, easiest way to pay.
(Actually, only one step, get your iPhone out, keep thumb on home button while putting it near NFC reader.)
This is the problem in the US!! I do recall being able to use Apple Pay at Home Depot, but, they, like others, have changed POS systems or payment services and they only accept chip or swipe cards now. Some places accept some NFC payments, but not Apple Pay. Some places have dropped everything except swipe. Most food places haven’t updated at all, only swipe, which is ridiculous! It’s not because people weren’t using it, there is some other reason for it. I think paying through an app has become what they all want, that way they can track your purchases and use or even sell that information. I am totally against this, you have to put your credit card information into each app to use it this way...and you have more and more servers where your credit card (and other information) is stored and more and more chances of it being hacked. ...Kroger won’t accept Apple Pay but working on another system like this. They aren’t listening to what we want, but trying to do what they want.
Unfortunately, there is no way to force merchants to accept Apple Pay. Only thing we can do is keep telling these companies we shop where we can use Apple Pay first, because we prefer the security, privacy and ease of use.
It’s not possible to disable Apple Pay but still allow other contactless payments. The payment terminal has no way of knowing you’re using Apple Pay because it is using industry standard contactless EMV to send your payment information. To the payment terminal it looks like you’re just holding up a physical contactless credit card.
Speaking of contactless cards, all the banks are finally rolling out contactless cards. It’s only a matter of time before the payment networks mandate it. Visa and MasterCard already mandate contactless payment support anywhere their cards are accept in most other developed countries. Once that is mandated and contactless is enabled everywhere here in the US Apple Pay support will come along with it.
Firstly the USA is not a large % user of wireless payment technologies, but that is driven from two purchasing behaviours: Total penetration of physical credit cards in stores and the inability to use paywave when purchasing online.
In terms of real facts: Support for wireless payments, wireless payment transactions and Apple Pay have all grown significantly since launch in the USA. In 2018 more than 50% of stores supported wireless payments, the majority of wireless payments in the USA are conducted with Apple Pay (over 90%).
However Apple Pay is a payment platform, not just a wireless payment system. So far, over 10 billion transactions were conducted using Apple Pay in 2019 (worldwide). Additionally Apple's involvement in payments does not end with Apple Pay, the introduction of the Apple Card is a means to further penetrate and enhance Apple's involvement in payments and Apple Pay Cash is also another means of enhancing Apple's strategy to digital wallets.
Also Bain speaks about China, which is a poor source for two reasons: It is a protected economy, so usage doesn't reflect sentiment and ApplePay is relatively recent in China.
Finally, as you noted, Bain gets the function of Apple Pay wrong. It is indeed much easier than described, and Apple Watch owners can attest that it is the simplest form of payment; arguably this is the best implementation of any payment system to date.