Apple will Play a Bigger Role in Handling Your Money

Online signup forms have been a necessary evil since the dot com boom, and going through the dreadful process of creating accounts and giving up credit card information is a pain we all know too well. 

As a solution, Apple unveiled Apple Pay along with the iPhone 6 and the Apple Watch in fall of last year. Apple Pay pulls saved data from your iPhone and streamlines the process of signing up for any app, freeing you of the burden of entering payment information every time you sign up for something. 

Apple Pay works on Apple’s latest iPhones 6 and 6S and is basically a “mobile wallet” that allows users to tap their devices on readers at store sale counters and purchase by scanning their fingerprints. Currently, Apple Pay is one of the top reasons why people buy the Apple Watch and the system was reported as the most popular method of mobile payment as soon as it was introduced.

Since its conception, Apple Pay was viewed as the next big thing. It's streamlined process was set to reduce the typical rate of cart abandonment of 65% and increase revenue for businesses. For developers, Apple Pay meant that a lot less time and development budget was to go to the commerce solutions for apps. Additionally, Apple Pay's pay option leads to less fraud as it keeps personal credit card information out of the transaction flow. It’s even claimed that this mobile wallet is more secure than standard debit and credit cards.

Black Friday Slump

Despite anticipation for the increased use of Apple Pay this past Black Friday, it was not the main method used for purchase in stores. The chart below is provided by InfoScout, a research firm that collected data from 300,000 shoppers on Black Friday to see whether they shopped with mobile wallets. 

The InfoScout survey has a few shortcomings. Notably, it doesn’t track in-app payments through Apple Pay, AirBnb, Uber, Best Buy, Target and several other major businesses that have added Apple Pay functions in their apps.

Other reports also indicate that Apple Pay certainly wins high marks for having captured much fanfare during its hype cycle but that its actual popularity is feeble. In fact, the use of Apple Pay has even gone down as 4.9 percent of users used Apple Pay on Black Friday of 2014 whereas only 2.7 used it on the Black Friday of this year.

Adoption and Usage

Other issues that have affected the adoption and usage of this mobile wallet are that Apple Pay acceptance is not universal. Retailers have proven wary about supporting the feature. Apple’s insistence that Apple Pay be only on its latest iPhone 6 and 6S is also another factor responsible for its underuse.

The data from InfoScout is still surprising considering that Apple Pay is a heavily-marketed product from Apple that has steadily added giant retail partners in the past few months. It's also available on the popular Apple Watch platform. 

P2P payment

The latest tech trends have leaned towards apps that task themselves with sending cash to friends. PayPal and Venmo are currently among the most popular of these. Growing competitors include Google, Facebook, Square, and now…. Apple.

According to Bloomberg, Apple plans to introduce its own person to person (P2P) payment feature. Apple plans to embed this P2P feature into Apple Pay to allow users to send money to friends (or anyone really). The service is likely to be free to use with debit cards in order to be competitive. Apple has already spoken to several banks about P2P transfers.

This move is a bold one for Apple as P2P payment services are not cheap to operate and are already dominated by giants. Validating a new account, usually tied to a debit card will cost Apple 50¢ to $3 apiece, plus at least 25¢ per transaction. Unless Apple finds a way to profit directly from the feature (Venmo hasn’t been able to yet), Apple may be planning to use this P2P service as an attempt to increase the use of Apple Pay in stores. It’s speculated that enrolling in Apple Pay will be necessary to use Apple P2P.

Expansion into China

Apple has also reached a preliminary agreement with China’s main bank, China Union Pay, to introduce Apple Pay in this country by February of 2016 -- before the Chinese Spring Festival holiday.

It seems like a great idea that Apple gain access to the Chinese Market, however, Apple Pay could still face regulatory hurdles in China as government agencies oversee much if not all of e commerce and banking. Apple Pay will face stiff competition in China even though electronic payments and the use of iPhone are booming.

On the state-side, UnionPay holds a monopoly in China (that’s why Visa and MasterCard don’t). In the private sector, electronic payments are dominated by Alipay (with 45% of market), an affiliate of Alibaba Group Holding, and Tenpay, run by Tencent Holdings (with 19%). To prosper in this new arena, Apple may even want to consider striking a partnership with either one of these East-Asian giants early on.

Perhaps this P2P effort by Apple will finally incite us as consumers to wave our iPhones or Apple Watches for purchase instead of pulling out more traditional forms of payment in the near future. P2P may change the way we consume and even end up affecting the ATM market, who may have to rely on the need for cash to prosper.