The year of Apple Pay

Apple Pay, the Touch ID-authenticated in-store and online payment service Apple started rolling out last October, has been growing steadily in terms of bank and retailer support. During Apple's Q1 2015 conference call, CEO Tim Cook said the company was getting "extremely positive" feedback on Apple Pay from both individuals and institutions. That wasn't his biggest endorsement, however — it was calling 2015 the "year of Apple Pay".

Not too long ago, Apple called 2011 the "year of the iPad 2," and that product went on to establish the category and prove experience wins the technology fight. In some ways, Apple Pay has more work ahead of it than the iPad did: It's not yet international, it's dependent on financial institutions and retailers in a way far beyond traditional carrier and reseller relationships, and it has to educate people and politicians wary of electronic transactions or who are beholden to other interests.

Yet Apple Pay promises banks better security, retailers more efficient checkouts, and customers both security and efficiency. That makes it compelling.

From our Q1 2015 Tim Cook transcript, here's what he had to say:

Today, about 750 banks and credit unions have signed on to bring Apple Pay to their customers, and in just three months after launch, Apple Pay makes up more than two out of three dollars spent on purchases using contactless payments across the three major U.S. card networks.More merchants are excited to bring Apple Pay to their customers, and adoption is strong. Just today, USA Technologies announced they made Apple Pay available at about 200,000 places where everyday payments happen, including vending machines in businesses, airports, and schools; commercial laundry machines in colleges, universities, and laundromats; and parking meters and payment kiosks in lots across the country.

In contrast, here's what Jason Del Ray of Recode brings up as some of the challenges Apple Pay faces, even in the U.S.:

Apple needs to continue to sign up merchants to accept Apple Pay, so that shoppers don't have to guess where they can use it. Right now, some of the country's largest retailers, such as CVS, Walmart and Target, refuse to accept Apple Pay in their stores in part because they are backing a competing app called CurrentC.

That feels more like a bump than a barrier. Customers are used to not knowing if American Express, Diner's Club, Discover Card, or other transactional services will be available at any given store. Some stores don't take credit cards at all, and others remain cash-only businesses. It's annoying but it's expected in today's shopping environment.

Target already takes Apple Pay in-app, so it's not hard to imagine it'll go in-store as soon as legally possible.

Of the merchants obligated to CurrentC, the still un-launched Walmart-backed QR-code scanning payment service, some of them signed up years ago on spec and their exclusivity agreements will soon begin to expire. A few, like Target, already take Apple Pay in-app, so it's not hard to imagine it'll go in-store as soon as legally possible.

Walmart could remain a self-interested holdout, but customers can go elsewhere if it better suits their interests, or we can use other methods at Walmart the way those of us with American Express cards use other methods at VISA and/or MasterCard-only retailers.

Recode's Del Ray also includes loyalty programs and enhanced security as necessary steps to increase Apple Pay adoption, though the security issues he cites are on the banks' end, not Apple's, and seem part-and-parcel with larger steps banks need to take to combat fraud in general.

What makes me so bullish about Apple Pay is this: in-store, it currently requires an iPhone 6 or iPhone 6 Plus, which Apple sold 74.5 million of last quarter. Yet that number represents only a portion of the billion iOS devices sold to date. Apple will continue to sell more iPhones 6 and future iPhones, but come April the company will also start selling the Apple Watch.

With the Apple Watch, in-store Apple Pay will also become available to the hundred-plus million iPhone 5 and iPhone 5s owners. That increases the potential user base for Apple Pay in both directions — not only for future devices, but for past ones as well. The Apple Watch will also be new and it will be fun, and just like loyalty programs, both of those things tend to drive adoption.

With the Apple Watch, in-store Apple Pay will also become available to the hundred-plus million iPhone 5 and iPhone 5s owners.

Also, rumors of Apple Pay rollouts in the U.K. and Canada persist, and there's no doubt the service will eventually go international. Many countries outside the U.S. have widespread infrastructure already in place for contactless payments; for years now I've been able to use my NFC-chipped Canadian credit and debit card to tap-to-pay at retailers like Sears, restaurants like McDonalds, major gas stations, and more.

Moving to Apple Pay should be incredibly easy here, and I expect that to be true in other mature contactless payment markets. That will only add to the acceleration and mass, and then it starts to become a virtuous cycle for everyone.

There are no guarantees in technology and even less in retail, of course. Given where Apple has taken Pay in just three months, however, and Tim Cook's confidence on the conference call, 2015 could very easily be the year of Apple Pay.

And that wouldn't just be good for Apple. It would be good for us all.

Rene Ritchie

Rene Ritchie is one of the most respected Apple analysts in the business, reaching a combined audience of over 40 million readers a month. His YouTube channel, Vector, has over 90 thousand subscribers and 14 million views and his podcasts, including Debug, have been downloaded over 20 million times. He also regularly co-hosts MacBreak Weekly for the TWiT network and co-hosted CES Live! and Talk Mobile. Based in Montreal, Rene is a former director of product marketing, web developer, and graphic designer. He's authored several books and appeared on numerous television and radio segments to discuss Apple and the technology industry. When not working, he likes to cook, grapple, and spend time with his friends and family.

  • Hope we don't have to wait much here in India! Sent from the iMore App
  • As a Canadian recently in the payment biz, I can say that Apple Pay will be easy for the retailers here, but potentially difficult for the banks. The US started down the tokenization path before many other countries since they did not have Chip and Pin. Countries that already have EMV, didnt need tokenization until recently, so they are getting aboard now.
  • I haven't used apple pay and don't know many who have. Perhaps it's the future but I'm not sure I would declare this year as that. Obviously Cook would like to see it happen and he should definitely talk it up. Sent from the iMore App
  • Try it you might like it. I use it when it is available. Wegman's, Walgreen, and McDonald's are some that accept it in my area.
  • Agree. Just don't see the wow factor with it at the moment. Sent from the iMore App
  • I haven’t used it since the first weekend it was available. I went to Walgreen’s specifically to try it. The places I frequent don’t support it, yet.
  • Sounds great just bring it to the UK already. We have fo tactless payment machines in practically every retail outlet and pub nowadays. Hurry up apple lol Sent from the iMore App
  • I think Watch will accelerate Pay use. Think about the convenience of not reaching for your wallet or phone to use vending machines & parking meters. Not to mention an ever growing list of food & grocery sellers. Within a few years people will wonder how they ever lived without this convenience.
  • I use Apple Pay quite often and generally love it. I have had experiences (vending machine, cab, once at Subway) where I get a "hold near reader" message no matter how closely I hold it. This happens a *very* small percentage of the time, but it frustrates when it does, and it certainly happens enough that I would never consider leaving my physical credit card at home, which I think is the endgame Cook (and we) want.
  • "[...] it currently requires an iPhone 6 or iPhone 6 Plus, which Apple sold 74.5 million of last quarter. [...]" I hate to be "that guy" but Apple sold 4 iPhone models, of which we don't have the precise mix... Only a mention that the iPhone 6 was the number one model. So the 6/6+ sales could be as low as around 38-40 mil units for that statement to be true (although it's most definitely higher than that). A ballpark figure could be 55-65 million 6/6+ units... (and no, I'm not John Siracusa in disguise)
  • When is Apple pay coming to Canada Sent from the iMore App
  • I'm not sure if I misunderstood your comment Rene, but to suggest people will shop elsewhere because Walmart doesn't have apple pay is misunderstanding how consumers shop.
  • That's precisely how people are beginning to shop. Cautiously. I have already changed my shopping routines because of Apple pay. I know many people that are getting fed up with data breaches that they are looking else where for merchants that offer safer payment methods without high exposure of personal information. Apple pay is the future of payments. Sent from the iMore App
  • When you talk about the amount of people that shop at walmart and the reasons why they shop at walmart, you will recognize that it's about saving money and not about the payment method. Edit** To be clearer, if there was a walmart competitor that was in the same area as the walmart in question and the only difference was the payment method then I would agree with your assessment in mass quantities.
  • I know I won't. I love using the NFC payment method (G Wallet) but it will never stop me for going to a grocery store where is not supported. It's not a big deal for me. Bacon is a big deal...but I digress. People may call it the future of payment but it will never replace cash or credit cards.
  • Agree. I have had Wallet access for years and now that Apple Pay is here more places are adopting NFC but to say I will change buying habits because a store has an NFC reader is a bit ridiculous for Rene to say. I don't care if it is Wallet or Apple Pay, that is not going to happen. Price and quality of a good have a larger impact on purchasing habits than payment methods. As long as they still take a credit card then I will still go there if they have a product I want at a good price. Posted via the iMore App for Android
  • They tried to spin that here when Apple Pay first came out and some places weren't going to support it. As if the large majority of shoppers could give two bits about it. Talk about living in a bubble.
  • Anecdotal only - but my friends and I notice we buy more when we use Apply pay. We've returned to (mostly) using cash at brick & mortar stores & what we buy is limited to cash on hand. For stores that accept Apple Pay, we don't have that restriction
  • Do you leave your credit cards at home? Sent from the iMore App
  • Sure do, leave home without them...started after Target breach
  • what are you waiting for Apple, bring it to Australia already. We're usually at the forefront of these things (eg. iTunes Radio)... why is this taking so long. :P
  • Apple Pay is one of the reasons I am coming back to Apple that and the watch I would really like to see a way to put our licences into the phone too and yes make it also work with other platforms so it was not a exclusive but to be able to be wearing the watch and have my phone in the drink holder and I wouldn't be wondering if I forgot my purse or even just the wallet
  • I am still waiting for Apple pay to come to Canada
  • Does anyone know how the Apple watch will work when making payments. Will we just place our finger on the watch screen as we hold it over the contactless reader?
  • Very good question. I hadn't thought of that.
  • "Thanks to sensors on the Apple Watch’s back, the device can tell when it’s being worn and when it has been taken off. When you first put the watch on, you must enter a code. When the watch is removed from your wrist, the watch locks itself and can’t be used for payments unless the code is entered again." Also, the top two comments are hilarious and worth a read at the bottom of the page.
  • I love Apple Pay and have noticed that I have even started shaping my shopping habits around places that accept it. It's easy to use and I feel far more secure. I just wish that my credit union would get on board with it.
  • Anything good for Apple Pay is good for Google Wallet and in turn me. :)
  • Not sure how a iPhone 5 would use Apple Pay, as no fingerprint sensor. Only the 5S and 6, 6Pro , and new iPads have that. But I love it on my 6. At McDonalds, I don't have to fish under my heavy winter coat for my wallet, pull out money or a debit card, etc. Just tap and go.... although it usually takes a couple of tries for it to get my thumbprint right. But still way easier. When I am out driving now, I prefer McDonalds for fast food because of the Apple Pay, and better coffee and iced tea than Culvers! I would just like to see Apple Pay on a smaller phone. My wife does not want the big 6, much less 6 Pro. Maybe there will be a 7 Mini!