Apple Pay merchant acceptance received an important boost with plans for Starbucks, KFC, and Chili’s to support the mobile payment service through iPhones and Apple Watches. Expanding into major restaurant brands gives Apple more opportunities to make mobile payments part of consumers’ everyday routines, particularly as the company works to sustain usage following the initial enthusiasm surrounding Apple Pay’s launch.
The Starbucks partnership could be especially significant because of the retailer’s highly successful mobile payments and loyalty ecosystem. Starbucks has demonstrated that consumers will embrace mobile payments when they are connected to rewards and other benefits that encourage repeat usage. If Apple Pay can effectively integrate into that experience, it could provide insight into how payments, loyalty, and wearable devices can work together to increase customer engagement.
It was announced recently at the Code Mobile conference that Starbucks, KFC and Chili’s will begin to accept Apple Pay through Apple phones and watches. This may end up being more beneficial to Apple then to the merchants. There have been many industry reports showing that Apple Pay is having difficulty holding on to their initial usage rates achieved when they launched a year ago. Apple dismissed those reports and focused on their achievements:
I have to say in the last year of working on Apple Pay, we’ve sees a sea change in momentum around acceptance at the merchant level,
” Bailey [Jennifer Bailey, vice president of Apple Pay] said, adding that about 80 percent of Apple Watch owners “very actively” use Apple Pay. Apple Pay will hit KFC restaurants in the spring and Chili’s restaurants in 2016 as a “pay at the table” model, she said.
The success of the Starbucks Apple Pay partnership in particular may weigh heavily on Apple’s ability to tie into the much heralded Starbucks loyalty program.
Expanding Apple Pay merchant acceptance is an important part of driving adoption, but simply adding more places to pay may not be enough to create sustained usage. Partnerships with frequently visited brands such as Starbucks, KFC, and Chili’s give Apple an opportunity to make paying by phone or watch a more familiar consumer behavior.
The larger opportunity lies in connecting Apple Pay with merchant loyalty and engagement programs. Starbucks in particular could provide a valuable model for demonstrating how mobile payments become more compelling when they deliver benefits beyond checkout. Successful integration could help Apple encourage repeat usage and strengthen Apple Pay’s position in the mobile payments market.
Overview by Sarah Grotta, Director, Debit Advisory Service at Mercator Advisory Group
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