Credit cards are killing the Apple Pay star

Apple Pay was much hyped when it launched nearly two years ago, but it is failing, writes Peter Nowak.

Credit cards’ simplicity and flexibility is why they’re everywhere. Matt Cardy / Getty Images
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The modern credit card is the perfect piece of techno­logy when you think about it.

In a lot of cases, you can tap your card on a merchant’s pay terminal and quickly conduct a transaction. Stores that are not as advanced still allow consumers to insert their chip card and punch in a Pin, or even swipe and sign. With online purchases, all you have to do is enter your number, expiry date and security code and you’re done.

Credit cards’ simplicity and flexibility is why they’re everywhere. Almost every merchant accepts them and almost everyone carries them in their wallet.

That’s the challenge Apple Pay – much hyped when it launched nearly two years ago – and other smartphone-based payment systems are up against. Not surprisingly, it’s also why they’re failing.

Apple, which gets a small cut of every transaction made through Apple Pay, doesn’t disclose usage numbers. But, according to a survey from the US consulting company Market Platform Dynamics, the percentage of people who regularly use Apple Pay has fallen sharply during the past year.

About 21 per cent of people polled last month said they use the service every chance they get, which is less than half the 48 per cent in a similar survey from March last year. Moreover, the number of people who said they rarely consider using Apple Pay doubled to 34 per cent, from 17 per cent.

Those declines come despite a large expansion in Apple Pay’s potential user base. The service, which works with newer iPhone models and the Apple Watch, is live in several countries, including the United States, Canada, United Kingdom, Australia and China.

The company, looking to expand to more markets, is reportedly in talks with UAE banks. It will add Apple Pay capability to its desktop ­Safari web browser later this year.

The reasons for the usage declines are varied, according to Market Platform Dynamics, but two of the more popular responses in surveys were, “I just forgot” and, “[I’m] not sure if this store accepts Apple Pay”.

If you’ve used it in one of the countries where it’s active, you probably understand. I was excited to use my iPhone to pay for purchases when the service launched in Canada in May, and I initially found that Apple Pay does indeed make transactions easy.

To use Apple Pay, you simply double-tap your iPhone’s home button to bring it up. Your device then instantly connects to the merchant’s near-field communications (NFC) terminal and verifies your identity with its fingerprint sensor. It’s quick, painless and, as Apple likes to tout, it’s secure – probably more so than a credit card.

The problem is that the merchant’s terminal has to have tap-and-pay NFC capability. Not all do, which leaves you guessing.

The Apple Pay-equipped consumer must therefore make a split-second decision with every transaction. Do you pull your iPhone out of your pocket or purse and hope the store can handle it, or do you get out your credit card knowing that it will almost definitely work?

Such decisions take milliseconds, but the tiny amounts of time add up when you put enough of them together.

All told, Apple Pay just takes longer to use, which makes it a “push” technology rather than a “pull” one. It’s a prime example of a technology maker trying to foist a feature on to consumers that they don’t necessarily want, which is different than an actual need that pulls both the company and merchants into it.

There are plenty of friction points when it comes to in-store transactions but credit cards aren’t necessarily among them. As Market Platform Dynamics points out, having to stand in long queues is a bigger problem for consumers. Companies such as Starbucks that are offering mobile order-ahead capability, where payment is handled behind the scenes without an actual terminal, are seeing rapid uptake as a result.

Apple co-founder Steve Jobs used to say that his goal was to give consumers something they didn’t know they wanted but once they tried it, they couldn’t live without it. Credit cards met that criteria long ago, but Apple Pay is falling well short.

Peter Nowak is a veteran technology writer and the author of Humans 3.0: The Upgrading of the Species