Pushing NFC payments is an uphill battle, but perhaps one that Apple can win

Apple’s live event earlier today focused mostly on new hardware: a new iPhone, the 6 and the 6 Plus, and a new very-much-anticipated Apple Watch. You can, and many, many people have, argue that the new Watch is beautiful, but it’s hard for me, as someone who has only seen the presentation and photos of lucky journalists trying on a Watch, to judge it beyond its physical appearance.

Which brings me to the third big thing Apple introduced today: Apple Pay, their own mobile payment method.

On the surface, Apple Pay seems great. It’s fast: just unlock your phone, scan your fingerprint for security, choose the account or credit card you want to pay with, tap your phone on the in-store device, and you’re done. That’s almost as fast as taking out your credit card and handing it to the cashier, right?

Additionally, the experts tell us, this method is more secure because the store doesn’t really receive your credit card or other personal information, only Apple has that information. After the recent large chain payment system hacks, including Target and Home Depot, the fact that stores will no longer store credit card information is a good thing. Yet, after the celebrity hack iCloud incident last week, I’m not sure Apple’s iCloud is the best place for this information. But allow me to put the security issues aside for a moment, not because they’re not relevant, but because I don’t have enough information or knowledge to analyze them. So let’s take the experts’ word on it.

Let’s take a deeper look at Apple Pay, as described in the keynote. I see three major obstacles that Apple needs to overcome order to get widespread adoption of the product, from both the consumer and merchants’ sides.

Apple Pay app: looks just like a wallet!  Source: Apple

Apple Pay app: looks just like a wallet!
Source: Apple

The first obstacle is having an NFC terminal at checkout. This is easier in a multi-checkout setup such as a supermarket or a small store where the terminals can be employed gradually and mobile payment customers can be directed to the right checkout stand. However, it’s harder in a  department store where several payment stands are scattered throughout the store and each would need to be equipped with a terminal. In either case, though, unless all registers are equipped with an NFC terminal, the customer will be inconvenienced. Once they’re inconvenienced, it’s very easy to just take out a credit card. As of now, Tim Cook said there were already 220,000 NFC terminals deployed in stores. That’s a tiny fraction of all cashiers in the US and a minuscule fraction of cashiers globally. This means that customers assume that there is a limited numbers of stores where they can pay with Apple Pay and that if they want to pay able to pay anywhere and everywhere, they’ll need to take their credit card. Right after launch, Apple Pay will be a new toy and consumers will be willing to give it a try. How many rejections will they take before they stop trying? How much time does Apple have to make NFC terminals ubiquitous in areas with a large concentration of Apple Pay adopters? How much influence do consumers have? Will payment options become part of the purchase decision? For the same product, will Apple users actively choose a store that offers Apple Pay or will they just take out their credit card and pay with it?

The second obstacle will be harder to overcome than even the first, and it’s not as obvious: connectivity. As I understand it, in order to make a payment with Apple Pay, the app has to be able to connect at the moment of sale. This is fine in urban stores, where there is fast mobile connectivity everywhere. But go inside a big box store, or into the bowels (i.e. the shoe department) of a department store that’s on the ground floor of a 4 or 5 story building and see if you get a signal. Newsflash: there isn’t one. Or go into the more remote areas of the US: the Rockies, the deserts, the Great Plains: data connectivity isn’t always available. If you want to buy a souvenir T-shirt using Apple Pay in say, Yellowstone, you’ll need a credit card. When I tried using Google Wallet to pay in Macy’s, it took several minutes to sync the app and have it ready to make a payment, even though this process takes seconds where connectivity is fine. By that point I had already paid with a credit card.

The third obstacle may be the easiest to overcome: making the NFC terminals faster. My experience paying with Google Wallet has been challenging, where I often needed several taps until the transaction was complete. Again, it was just easier to take out a credit card.

In the keynote, Apple Pay looks easy to use, fast and secure. Maybe, when the NFC stars are aligned, it will be. Until then, the question is how many negative experiences can a consumer suffer before abandoning the product completely? And can Apple rally the merchants before that happens?

Let’s end this post on an optimistic note: if any company can win this battle, it’s Apple.


One thought on “Pushing NFC payments is an uphill battle, but perhaps one that Apple can win

  1. Pingback: Apple Pay and CurrentC: Opening salvo in the mobile payment war | What it all boils down to

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