Truths about that 6% of People with iPhones in the US Use Apple Pay In-Store

A new article from PYMNTS claimed that only 6% of iPhone users use Apple Pay in stores.

As someone who works in the credit card industry and a follower of Apple, I have a few points to make with regard to this article. Per PYMNTS.com

Seven years post-launch, new PYMNTS data shows that 93.9% of consumers with Apple Pay activated on their iPhones do not use it in-store to pay for purchases. That means only 6.1% do. After seven years, Apple Pay’s adoption and usage isn’t much larger than it was 2015 (5.1%), a year after its launch, and is the same as it was in 2019, the last full year before the pandemic.

That finding is based on PYMNTS’ national study of 3,671 U.S. consumers conducted between Aug. 3-10, 2021.

First, I am naturally skeptical of surveys. To properly design and execute a representative survey whose results you can use to project trends both an art and a science. In other words, it’s difficult and tricky. Without knowing the specifics of the surveys that PYMNTS used over the years, I can’t really say for sure that their data is 100% accurate or representative. For instance, did these survey represent the U.S population demographically? We all know that older folks tend to be more reluctant towards technology than the younger crowds are. What if some of these surveys were more skewed towards Baby Boomer or late Generation X?

With that being said, let’s assume that these surveys were properly designed and conducted as there is no reason to believe that they weren’t either. Still, there are some important context points that I’d love to discuss. The U.S is traditionally slow in adopting tap-to-pay payments, compared to other developed countries in Europe. Here is what Visa had to say at the RBC Capital Markets Financial Technology Conference back in June 2021:

Canada is almost 80% of all tap to pay of all face-to-face transactions, almost 80% are tap to pay. In Europe, it’s over 80%. Australia, it’s almost 100%. Across Asia, it’s over 50%. And in the United States, it’s now over 10% from basically a dead stop a couple of years ago. So right now in the U.S., we’re a bit over 1 in 10 transactions with tap to pay, 1 in 10 of all face-to-face transactions of tap to pay. About 350 million cards, last time I looked, 268 of the top 300 merchants, 23 of the top 25 issuers are issuing contactless.

What Visa essentially said there is that mobile wallet transactions in stores basically didn’t exist two years ago. The low adoption isn’t confined to Apple alone. It’s applied to all mobile wallets on the market. Hence, it’s not a surprise that only a small number of consumers used Apple Pay in stores. Since then, the tap-to-pay transaction share has increased a lot, but from contactless cards, not from mobile wallets.

The issuer where I work only introduced contactless cards in August 2019. The roll-out was gradual as we enabled the feature only on new cards and renewal replacements. Before August 2019, we saw contactless transactions make up only a low single digit percentage of all transactions. After the change, there was an increase in contactless transaction share, but it mostly came from contactless cards (as in you tap a plastic card against a card reader). It makes sense for several reasons: 1/ Using a plastic card, whether it’s debit or credit, is a habit. It’s unreasonable to expect consumers to change their habit overnight; 2/ To some consumers, it’s just not convenient to take out a phone to pay. During the pandemic, we all had to wear a mask. That contributed to the inconvenience as most Apple Pay transactions have to be approved by using Face ID (few iPhones in circulation are too old for Face ID); 3/ Sometimes, the card readers just don’t accept mobile wallet transactions. I personally experienced it myself several times when a technical glitch forced me to pull out my wallet and use my plastic. Even when card readers are to become more reliable & friendlier with mobile wallets and the pandemic closes out soon, the current habit of flashing a plastic card in stores won’t go away any time soon. It’s a painstaking process that will take quite a while and it’s not even a guarantee that it will change significantly at all.

The low adoption of mobile wallets in general leads me to my next point: how is Apple Pay compared to other wallets? The article by PYMNTS did bring up some comparison between Apple Pay and its peers:

Today, Apple Pay remains the biggest in-store mobile wallet player, with 45.5% share of mobile wallet users. Over the last seven years, the total amount of Apple Pay transactions at U.S. retail stores has increased from an estimated $5 billion in 2015 to $90 billion in 2021.

Although that growth is commendable, it is largely the result of more people with iPhones upgrading to newer models and more merchants taking contactless payments, both leading to a general increase in retail sales – 12.9% greater in 2021 than 2019. But to be successful, innovation must solve a problem, fix a source of friction or improve an experience that is so painful that consumers or businesses are motivated to switch.

The article is so focused on Apple Pay that it missed two important points. One is that Apple Pay isn’t Apple’s main business. It may well be in the future, but it surely hasn’t been since 2014. Why is it Apple’s fault that the adoption of tap-to-pay payments in the whole U.S is low? It’s not really reasonable to expect Apple to go all out and force a new habit on consumers when there is little financial reward. The other miss is that if only 6 out of 100 people used Apple Pay, which captured 92% of all mobile wallet payments using debit card in the U.S in 2020, what does it say for others? 1% or lower? Yes, 6% adoption is low for the most valuable company in the world, but in the grand scheme of things and in comparison with its peers, that figure suddenly looks significantly different, does it?

The last point I want to make is that it is NOT comprehensive and helpful to look at the mobile wallet share of in-store transactions. What about consumers who use Apple Pay or other wallets for online transactions? How many transactions do Apple users make using Apple Pay on their phones or through the App Store? How many transactions on web pages are through Apple Pay? Said another way, is Apple Pay more suited for online transactions than for in-store payments? And PYMNTS is judging Apple Pay on something that it’s not meant to address in the first place?

In short, I believe that this article from PYMNTS is useful to some extent as we have a reference with regard to in-store mobile wallet payments. However, the entire write-up lacks important context that can lead readers to misguided conclusions. My hope is that the whole conversion is more balanced now with what I mentioned above.

Disclaimer: I own a position on Square, Apple and PayPal.

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