Three days after launching the iPhone 6s and iPhone 6s Plus smartphone series in the United States, Apple Inc. reported a record 13 million units had been sold as of Sept. 28, 2015. Apple plans to expand distribution of the new series to 40 additional countries beginning Oct. 9 and to more than 130 countries by year end.
Like the previous iPhone iteration, the new units come equipped with Apple Pay. The new series launch also coincided with the one-year anniversary for Apple Pay's unveiling on the iPhone 6, which set the standard for other near field communication (NFC)-based mobile payment contenders that followed. More recent entrants in the U.S. market were Android Pay and Samsung Pay, which debuted Sept. 10 and 28, respectively.
But the latest surge in iPhone upgrades may not be enough to bolster Apple Pay usage, which has trended downward in recent months as early adopter influence has faded. "As we get farther away from the iPhone 6 launch last September, we see a growing population of Apple Pay eligible shoppers who are upgrading their devices based on timing of their mobile plans rather than the desire to own cutting-edge technology," wrote InfoScout's Ben Ahn, in a blog post.
Despite Apple Chief Executive Officer Tim Cook's optimism that Apple Pay acceptance could reach 1.5 million U.S. locations by the end of 2015, usage has been lackluster compared with Samsung Pay's jump-start overseas. Before its U.S. unveiling, Samsung Pay had recorded 1.5 million transactions valued at over $30 million during the first month after launch in South Korea.
Analysts have observed that Americans are generally satisfied with existing payment methods, and since mobile wallets are generally perceived as not resolving an existing systemic problem, mass adoption could falter. To counter this, education and monitoring the value proposition for each new entrant are imperative. This especially holds true for Apple Pay, which some consider less financial-industry friendly than other mobile rivals.
As mobile wallet choices continue to expand, financial institutions (FIs) and merchant acquirers must weigh the fiscal and brand impacts of aligning with one wallet over another. "There are important factors to consider before these banks and businesses should effectively give over control of their customer," wrote Andrew McLennan, President of Inside Secure, USA, in an article titled Think Twice Before Signing up with Apple Pay.
He noted that when FIs sign on with Apple Pay they "give up a portion of interchange, as well as important control of customer data, branding and other opportunities to streamline and offer value-added banking services." This critical issue was not overlooked by the FIs and third-party providers who initially chose not to participate in Apple Pay. Many recognized that partnering with Apple Pay could weaken brand recognition and drive customer attrition rates higher.
McLennan pointed out that when signing up for Apple Pay, Apple records customer data including address, phone number and other personal information. "With this information and payment data provided when using the app, Apple can track a financial institution's customer's spending habits, collect shipping information and obtain a plethora of other data that can be used for cross-marketing and other products," he stated.
This is a valid concern, since the Apple brand is most visible to Apple Pay users. Payment consultant Richard Crone of Crone Consulting LLC, a longtime advocate for protecting mobile payment branding, may have accurately predicted the end result when he stated, "The one who enrolls is the one who controls."
Rajesh Sharma, Vice President, U.S. Mobile Banking and Payments Division, at Inside Secure agreed with Crone, noting that with every Apple Pay mobile payment, the Apple brand is top of mind for consumers, which is problematic for anyone attempting to maintain brand control. "Their brand becomes invisible – making it that much easier for their customers to switch to another financial institution offering the third party they are accustomed to," he said.
Others in the mobile payments space have voiced similar concerns. At the September 2015 Electronic Funds Transfer Association's Electronic Payments & Innovation Council meeting held in Napa, Calif., several attendees said the companies they were affiliated with, including bank branches, had invested heavily in mobile payment technology, and protecting those investments from a brand perspective was a major concern.
As an alternative, Samsung Pay appears to be more sensitive to critical issues. For one, it does not extract a piece of interchange, according to Will Wang Graylin, Global Co-General Manager for Samsung Pay and Chief Executive Officer of LoopPay. Instead, Samsung has focused on adding value to engage customers, which is not to say it won't seek revenue from sources merchants are already willing to share with channel partners, he added.
"For example, if we sell gift cards, the gift card providers are willing to share a piece of that revenue," Graylin said. "We're looking at how to provide value as a channel for merchants, also for the acquirers that are selling to merchants. If we can provide value there, then we would be able to earn some of the marketing dollars that merchants are already spending on these different channels."
Graylin contends that Samsung Pay is the most friendly open-wallet solution. "From our background, we understand this is an ecosystem, that it's supported by merchants, financial institutions and consumers," he said. "So we take a very different approach than most people."
Part of that approach revolves around offering the right type of utility for consumers to adopt, which includes acceptance not just for payment cards, but everything else that fits inside the physical wallet, and to digitize and secure each component. "If we can create utility, then we can also create a better engagement channel for the merchants and financial institutions that are out there," Graylin said.
For mobile commerce to gain a secure foothold, education on all fronts will be vital.
Greg Burch, Vice President of Mobility, Business Development & ISV Relationships for Ingenico Group, feels that the competitive nature of the small to midsize business space and the fact that ISOs want to differentiate themselves in the marketplace will serve to bolster educational efforts.
He said, "I think while Google, Apple and Samsung will make materials available and will definitely take a role in making sure that people understand how to use the technology, you're also going to see savvy ISOs and agents push through to be a part of that process and to help as a means and a way to educate merchants themselves."
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