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Banks Sign Up For Apple Pay, But What About Retailers?

December 12, 2014 - Apple, Business, eCommerce, iOS, Mobile -

If reactions from the banking system are any indication, the Apple Pay launch is already looking like a success. The Wall Street Journal reported last month that hundreds of financial institutions had already signed on with Apple prior to the formal launch of the payment system, despite the fact that banks integrating with Apple Pay are not able to integrate their own mobile banking credentials into Apple Pay and risk seeing their brands subsumed into the Apple Pay experience.

There seem to be two key reasons for the bandwagon.

The first is a simple fear that customers would change banks before changing phones. Yes, the average consumer cares more about the phone they talk on than the people to whom they entrust with all their money. Consider that for a second.

The second is a little more subtle. Within the hierarchy of Apple Pay, the real victory is establishing your bankcard as the default card for payments. Every time you open your wallet, the effort required to choose one card or another is the same. But, the thinking goes, once a card is selected as the Apple Pay default, customers will probably be far less likely to either change it or to select another card for a specific purchase.

So the battle is really to get there first and establish your place in the customer’s digital wallet. Do it once, do it now, and see ongoing incremental sales gains.

And that’s fine in theory, but there’s a bigger question facing Apple Pay users: will there be anywhere to actually use it?

A Black Friday sales analysis showed that less than 10% of those who could use Apple Pay over the long weekend actually did. This is not because of the product itself (over two-thirds of those who have tried Apple Pay rate it superior to swiping a card on multiple metrics). Rather, customers are reporting that there simply don’t seem to be a lot of places to use Apple Pay.

This is not simply a case of a couple major national players (WalMart, 7-11, CVS, Rite-Aid) blocking the system as they seek to build their own competitive solutions. The bigger issue has to do with a fundamental decision Apple has made: Claiming that to do so would imperil security, Apple will not be collecting – or allowing retailers to collect – most of the detailed purchase information that informs and drives brand loyalty and CRM programs.

What do you think? Does this diminish the value of a retailer loyalty effort? Does this mean retailers will have to start cutting back on loyalty program benefits (and costs)? Or will Apple ultimately have to start sharing to achieve a critical mass of retailers in the market?

Check back on Monday for the second part of this post, where we look at how loyalty programs will, or won’t survive in the mobile wallet.

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