The last few weeks have been good for Apple Pay and its closest competitors, Samsung Pay and Google Pay. First, Apple Pay chalked up some major merchant wins, including Costco, CVS, and 7-Eleven. Second, Samsung Pay announced it is now supported by 2,000 financial institutions in 24 geographical locations and has processed over 1.3 billion transactions. (Note, however, that Apple claims more than 1 billion transactions per quarter, so the race is not particularly close.) So, is it now time to revisit the prospects for these phone-based universal wallets?
The CVS win is particularly notable because CVS actually turned off its contactless readers rather than accept Apple Pay, which had the side effect of shutting down contactless cards as well as Google Pay, which likewise relies on the Near Field Communication (NFC) version of contactless technology. Samsung Pay has magnetic-stripe-emulation technology, which makes it compatible with most terminals, although it’s not clear how many users avail themselves of this option. CVS did this in order to promote its own mobile wallet, CVS Pay, which it developed using technology from the failed CurrentC merchant-owned wallet consortium. Either CVS now believes it has enough traction with CVS Pay that it can open its terminals back up, or as my colleague Brian Misasi suggests, it is having enough troubles with CVS Pay that it is bending to pressure from customers to get on board with the “Pays.”
Whichever it is, there is a possibility that the relative success of merchant wallets has had the beneficial effect of training consumers to use their phones for purchases, thereby making them more willing to try the wallets that are built into their phones. While it appears that Apple is not in fact opening up its NFC chip, which I suggested could get consumers accustomed to using their phones for purchase, this could be another route to the same result. Also, Apple finally started giving consumers incentives to use Apple Pay, through its Summertime Savings promotion, which included eight merchants who agreed to offer discounts when Apple Pay was used with their mobile apps or websites. It has been clear since the first wave of mobile wallets debuted in the early 2000s that simply having payment capabilities built into phones is not enough to drive adoption; there must be additional incentives. Samsung Pay deserves credit for having had a rewards program in place for several years.
Mercator’s most recent survey research shows that merchant wallets still hold a lead in usage over the Pays, but the Pays do enjoy growing use among consumers who use mobile payments more than 10 times a month. This reinforces the idea that consumers who have signed on to the idea of using their phones for payments (whether through a merchant wallet or through a phone-based wallet) are more likely to use a variety of wallets.
In short, while I do think there is more work to do on the part of the Pays to drive usage, in particular promotions with merchants, things are looking up for them, and we will closely examine next year’s survey data to see whether usage rates are starting to rise substantially. It is not unusual for new payments technologies to have an extended adoption cycle, and it is encouraging that Apple seems to be recognizing that it has to do more to drive adoption. Google needs to do the same sort of thing, which should be easier for that company because it has so much more involvement with merchant advertising on its search platform. We can have cautious optimism that things are indeed moving forward.
