Why Apple Pay Matters To Local

There are Apple Pay enthusiasts and Apple Pay skeptics. I fall into the former camp, although I’m not blind to the challenges it faces.

In recent weeks I’ve heard quite a few skeptics express doubt about the outlook for Apple Pay — including several local media execs who don’t think it has any relevance to them. They’re completely wrong.

There is an impressive list of banks and retailers working with Apple Pay today. Among the retailers are Bloomingdale’s, Subway, ToysRUs, Walgreens, Wegmans, Chevron, Whole Foods, Sports Authority and multiple others.

It will take a few years for near-field-communications (NFC) enabled point-of-sale systems (and Apple Pay acceptance) to penetrate all the major retailers, QSR chains and gas/convenience stores. It could take even longer at the “mom and pop” level — although companies like Square and other SMB-focused POS providers will accelerate that process for their merchants.

But why would Apple be able to succeed with offline/NFC mobile payments where PayPal and Google so far failed? The answer is because Apple has the power to generate awareness and make markets in ways that not even Google can.

Google Wallet never received the kind of exposure in the media and from partners that Apple Pay has experienced. As one example here’s an image of an ATM screen from Wells Fargo after Apple Pay launched.

Wells Fargo Apple Pay

Nonetheless the NFC availability of Apple Pay will be limited and incomplete for quite some time. While not having to sign a credit card receipt is reason enough to use Apple Pay, paying with a plastic card at a physical point of sale today is not that painful.

Where Apple Pay will have an immediate impact is in the world of apps and “mobile commerce.” The potential impact that Apple Pay will have on true e-commerce is tough to precisely predict right now but will be significant because it removes significant transaction friction. More importantly, iOS app developers will uniformly enable Apple Pay as a payment options for iPhone users. This will happen very quickly, within six months across the board.

This is where the near-term “local impact” will be.

Increasingly one can pay for real-world items and services with mobile apps: OpenTable, Uber, Groupon, Apple Store, Starbucks, Panera Bread and so on. The ability to pay for items purchased in stores with an app or “buy online” and pick up in store will be increasingly common. Over time, a range of traditional services (think YP headings) will offer the same options either through dedicated apps or marketplaces that aggregate SMBs (e.g., SERVIZ).

Within a couple of years paying for offline services with apps will be very mainstream. Paying with a credit card may become as annoying as writing a check is today.

To reiterate: the way that Apple Pay (and other similar services) will impact local is by enabling in-app payments for local experiences and services in the near term. OpenTable and Uber are the models for this.

Over time all kinds of data will be thrown off by this model, as loyalty and indoor marketing are incorporated into in-app and mobile payment experiences. There are also ROI and attribution implications to mobile payments. But all that is another discussion.

The lack of NFC-enabled POS terminals and corresponding challenges surrounding local merchant adoption is kind of a red herring in the discussion of mobile payments and its offline/local impact. The real action is in-app payments. And it’s all going to happen relatively quickly.

Consumers will come to embrace the convenience (and security) of mobile payments and Apple Pay in particular. Companies that ignore Apple Pay and mobile payments do so at their own peril. Because those that do, in only a couple of years, will probably find themselves at a competitive disadvantage.

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