Apple Pay: The Road To Ubiquity

The one-month anniversary of Apple Pay’s official launch prompts the payments ecosystem to ask where we were, where we are, and where we’re going. To celebrate, speculate and make predictions about the road to Apple Pay (and mobile payments) ubiquity, MPD CEO Karen Webster caught up with Daniela Mielke, Chief Strategy and Product Officer at Vantiv, who proposed her thoughts on when the real consumer value proposition will kick in.

KW: So it’s been about a month since Apple Pay publicly launched. We were together in San Francisco at the beginning of that launch, and I got your impression at the start. I’m just curious – a month in, after all of the hype and narrative about Apple Pay, what are your impressions today?

DM: Well I think we remain very excited about Apple Pay and its potential. We actually see traction with some of our merchants, large merchants that are targeting the Apple demographic, like Whole Foods. Large merchants in general are leading the charge because they know they have to upgrade their terminal infrastructure. They will be EMV and NFC capable earlier than small merchants, and small merchants will follow as cheaper terminals become available to them.

We had a promotion with large merchants on an NFC-enabled Verifone terminal, and we’re having very good traction. So when small merchants are buying new terminals now, they are buying NFC-enabled terminals. That’s exciting. We definitely see the merchant infrastructure moving, but I think we all know it will take time.

On the consumer side, I think the people who are tech savvy and who like to try new things are definitely trying Apple Pay. But for the larger consumer base to move, there’s still a lack of a real value proposition. Even if a tap is really smooth, it’s not that much different than a swipe. I think there has to be more than just an easier transaction in the long run, so I think we’re waiting for Apple to do more, and they have the potential to do so.

KW: You mentioned Whole Foods – you’re right, they’ve been very public about their results. Do you get a sense of whether or not that represents incremental value to Whole Foods, or are those transactions that would have happened anyway, with a card?

DM: I would think these are just replacement transactions. Who would not have a card handy, and then pay with a phone?

KW: That’s true, but the magic of all of this is to drive incremental value – new customers who like the experience and convenience so much that they’ll make merchant decisions based on those payment preferences.

DM: I would think that the immediate value is actually faster checkout – it’s pretty fast. I don’t know about incremental transactions, especially at large merchants, frankly.

KW: It also depends on flow. If you have to wait for your groceries to be bagged, you’re really not speeding anything up. It is an interesting experiment though. I have a question about loyalty – I agree that that will be the sweet spot for igniting mobile payments. What are you hearing from merchants about that? Are they looking to try to wrap their programs around Apple Pay? What kinds of conversations are you having about loyalty and Apple Pay?

DM: It’s all over the place, really. Some merchants have their own solutions and have a very clear idea of how they want to create loyalty with their customers and what role Apple Pay plays in that. Others are trying to figure out. I don’t think there’s any model emerging at this point, and we’ll be seeing a lot of trial and error.

I think there are also other ways to make Apple Pay more plausible for consumers than just loyalty. The moment you can really leave your wallet at home, the moment you have your identity on your phone, the moment the acceptance infrastructure really takes off and you can just leave with just your phone – that’s when there’ll be a real consumer value proposition.

KW: I agree with you. When there’s ubiquity, convenience is enough. But until then, there needs to be a bit more.

DM: Yes, and we’re definitely seeing all of the other wallet players moving. I think they see that there’s a great new competitor, so there’s a threat. But on the other hand, there’s also an opportunity for Apple to create this category and awareness and know all the barriers to trial – that’s a good thing for other wallet players as well.

KW: Yes, the enabling technology – NFC – is certainly shared by other players in the space. From what we’re hearing, they’re also getting a lift based on what Apple Pay has done to raise awareness and visibility. In fact, Google is creating lots of incentives more consumers to activate their wallets as well.

DM: Yes, that’s true.

KW: So it’s an exciting time. We’re 30 days in, and we have a long road to travel. But what are your impressions for 2015, as you’re looking at your plans and thinking about how you can best help your merchant customers?

DM: Well, from a technical side, there’s still a lot of uncertainty around tokenization. I think the standards and economic models are still evolving, so there’s still a lot of work to do by the networks and acquirers. Then the other thing is really about exchanging doing the hardware refresh, and exchanging the acceptance infrastructure.

KW: Is that going faster than you thought it would?

DM: Not really, I don’t see it in the numbers. Anecdotally, I see more and more large merchants accepting NFC, but I think we have to wait for the first numbers.

Daniela Mielke
Chief Strategy and Product Officer, Vantiv

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