Apple Pay Reaches 2 Year Anniversary

by Raymond Pucci 0

No need for many candles, since Apple Pay is a mere toddler at 2 years old. But the alternative payment method has really grown far beyond its age. But as the following article relates, it’s a competitive world out there.

Five months after shaking hands with Apple Inc., retailer Kohl’s Corp. is starting to compete with the tech giant’s mobile-payment service Apple Pay. For Apple, the market leader of in-store mobile payments, moves like Kohl’s are becoming increasingly familiar. Over the summer, Wal-Mart Stores Inc. rolled out its own mobile-payment service nationwide and pharmacy chain CVS Health Corp. introduced CVS Pay.

Apple Pay, which turns 2 years old this month, is facing stiffer competition and needs to find ways to stand out in a crowded field. In the next year, most retailers and fast-food restaurants will start their own mobile-payment services, and some of them will also offer Apple Pay. The service, which expanded into Russia earlier this month, is looking to absorb more functions of people’s traditional wallets, such as transit cards and retail loyalty cards.

The value of in-store transactions by people paying with their mobile phones, known as proximity payments, is expected to reach $210 billion by 2019 in the U.S., according to researcher eMarketer Inc. While that may produce a small but growing stream of revenue for the technology giant, the Apple Pay feature may also make the company’s phones more attractive, boosting loyalty among users and helping Apple compete with rivals like Samsung Electronics Co.

Banks and retailers see a big part of that value addressed by integrating payments more deeply with rewards, coupons and loyalty programs. Capital One Financial Corp. has added more transaction analysis and control features, said Tom Poole, a managing vice president at the bank. It lets customers activate and disable their bank-issued cards via its app. Samsung Pay lets users earn gift cards from Dunkin’ Donuts as well as earn money with its own rewards prepaid card. Alphabet Inc., the parent of Google, tested its own loyalty program, the Tap 10, earlier this year.

Smartphone screens are getting very crowded with the mobile pay apps that are being introduced regularly by seemingly everyone, especially stores and restaurants. Their big benefit is integration with loyalty and marketing programs which keeps shoppers and diners coming back for more. Apple Pay got out of the blocks early and has achieved widespread acceptance, although user adoption levels still lag far behind. Consumer’s muscle memory is still locked into pulling plastic from their wallets, but Apple Pay should see slow but steady usage gains.

Overview by Raymond Pucci, Associate Director, Research Services at Mercator Advisory Group

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