Putting The Fizz In Apple Pay

In an article titled Why Apple Pay Is Fizzling and What It Means for the Future of Mobile Payments, MPD founder David Evans writes:

“Apple Pay is fizzling. And unless it drastically changes course Apple Pay will follow the hundreds of other attempts, made around the world in the last seven years, that have sputtered along at low levels of use or, much more frequently, have just flat-out died. The evidence from Black Friday confirmed my fears. InfoScout did a survey of 400+ people who (a) had IPhone 6s and therefore could have had Apple Pay on their phones who (b) were paying at stores that had NFC terminals that accepted Apple Pay. So these are 400+ people who could have paid with Apple Pay. Less than 5 percent did.”

My take: It’s way too soon to be calling the death of Apple Pay.


Take a look at the following charts showing iPod sales.

Pronouncing the failure of Apple Pay in December 2014 is akin to proclaiming in Q1 2002 that the iPod would be a failure.

And there were plenty of reasons–two-side reasons as Mr. Evans might call it–to support an iPod death notice in Q1 2002: Consumers didn’t know what it was, there was no music no buy online, anyway, they were perfectly happy buying CDs (and certainly wouldn’t want to have to throw away all those CDs they had amassed). On the other side of the coin, music publishers and the stores that sold those CDs certainly had no vested interest in supporting the sale of iPods.

I would imagine that a survey of 400+ people who bought music back in Q1 2002 might show little interest in something called an iPod.


The InfoScout survey may very well be a representative sample of iPhone6 owners, but are existing iPhone6 owners representative of the overall public?

In addition, it seems very unlikely to me that a primary reason for those people who rushed out to get an iPhone6 was the Apple Pay feature. So what should we expect from the 400+ iPhone6 owners who were surveyed?


The point (put forth by Mr. Evans) that Apple Pay can’t be used at 98% of merchant locations isn’t a compelling death knell, either. Last I checked, both American Express and Discover were not accepted everywhere. They’re not dead.

It doesn’t matter how many places accept Apple Pay–it matters which places accept it.


Payments isn’t really a two-sided market. It’s more of a three-sided market: consumers, banks, and merchants (and I can’t help but wonder if, when talking about mobile payments, I need to throw in the telcos, and make it a four-sided market). All of which just makes any change in the market harder–and slower–to come by.

The “hundreds” of other attempts that have sputtered or died had, or have had, insufficient support from the constituents in the market. Many have tried to simply garner consumer support without sufficient support from the banks or merchants. Or have presented delusions of interchange reduction to the merchants, without any game plan for winning over consumers, and figuring the banks would roll over and play dead.

Sure, Apple Pay hardly has the support of many merchants–at the moment. But the lack of merchant support isn’t the same across the board.

A large percentage of the 98% that don’t currently accept Apple Pay may never accept any form of mobile payment, and who really cares, since a large of percentage of that 98% represent maybe 0.1% of all sales.

The “merchants that matter” fall into two (overlapping) categories: 1) Those that represent a good percentage of retail sales, and 2) Those where current and future iPhone6 owners shop at and buy from.

It’s the latter category that I don’t hear a lot of the pundits talk about. Everybody wants to focus on the MCX merchants not accepting Apple Pay. But Apple Pay can drive payment volume by following the Amex strategy–not accepted everywhere, but by enough of the places where Amex cardholders shop at. Case in point: Whole Foods.


Bottom line: I hate bad analogies, but I won’t let that stop me from giving one. Apple Pay isn’t a carbonated beverage losing its fizz. It’s more like a wine that needs to be aged.

The “aging” process for Apple Pay does involve a lot of moving parts: iPhone6 adoption, changing consumer behavior, bank (and credit union) support, and merchant acceptance (reluctant or not). In a three-sided market, strong support from two of the sides will probably be enough to bring along the third (even if it is kicking and screaming).

Which is why MCX is DOA. It’s all about one side of the market–the merchants. It can talk all it wants about how it’s supposed to be good for consumers, but that message has little meat to it.

Apple Pay, on the other hand, will provide additional convenience to some consumers and may provide other benefits in terms of yet-to-be developed features (for examples, see The Mobile Moments of Opportunity), gives a huge boost to banks (i.e., keeps them in the game), and is promised to benefit all parties in terms of reduced fraud.

That said, just because you let a wine age a few years doesn’t necessarily make it a good wine. But it’s simply too soon to say Apple Pay is “fizzling.”

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7 thoughts on “Putting The Fizz In Apple Pay

  1. Agree with your assessment. Apple Pay is just too early to proclaim success or failure. Until something becomes ingrained and part of your subconsciousness most people chose to do the same thing they have done over and over. As marketing and other Apple users start talk about how easy it is to use adoption will increase. Maybe next black Friday or cyber Monday may be a better indicator

  2. I also read the article by MPD founder David Evans. I also disagreed with his opinion. Apple and Google are in the midst of creating large and complex payment and wallet ecosystems. To use your analogy Ron, all they have done so far is sow some grapes. Let’s enjoy the process.

  3. Mostly agree. Far to early to talk about death of something like this. i think these backlash articles come because of all the hype and expectations set for it. That said, its been off to a slow start (which I expected) and there are still a lot of hurdles to work through…the biggest of which being the fact that well over half the market will likely never have their device which means they won’t be able to use it.

    1. I think we have to look carefully at the source of the backlash articles. In this case, the source–David Evans–is very credible. If the source were some tech or business magazine, I’d be inclined to write it off. But not Evans. Your comments begs an important question. As you said, Apple Pay has “been off to a slow start.” But “slow” is a relative term. Slow compared to what? To other technologies? To someone’s expectations? And even if it is off to a “slow” start, who cares? Does it matter what the usage was in the first 30 days of its release?

  4. I agree that it is too early to write off Apple Pay but they do have significant challenges to overcome in order to be successful (to be fair this is true for any mobile wallet). To your point there are multiple participants in the ecosystem that must get on board. The fact that Apple has chosen to work within the existing payments infrastructure means the banks and card schemes are on board which bodes will for their success. Your point on getting the “right” merchants is also correct but that does not make it easy – it will be a long road to get merchants on board but having the card schemes as a partner will certainly help (as an aside I am surprised Apple didn’t look at rolling out Apple Pay in established CHIP and PIN markets such as Canada and the UK at launch where NFC is already established in order to show success of the system… I am sure it is coming though). The real challenge will be convincing consumers to the benefits of Apple Pay. Apple Pay is no easier than NFC enabled plastic so that is hardly a compelling argument for consumers. It is definitely more secure due to tokenization and Touch ID but that is a very difficult narrative for consumers to understand given the general mistrust for mobile in general. If the consumer already has an NFC plastic in wallet then why would I bother to use Apple Pay when I am conditioned to paying with plastic already (as one of the posters mentioned in App purchasing is a different story). We can talk about couponing until we are blue in the face but that will not help in the near term and will take a lot of effort to change consumer behaviors. All this is not to say Apple Pay is fizzling but it will be a long road before Apple Pay can displace plastic at least at brick-and-mortar.

  5. I don’t think that its really a matter of “too early” or any other assessment. I believe that Apple will have success with it, because of who they are and how they’ve done it, who’s in with them [card associations], all the issuers that are lining up to take part and because this is something that has been begging to gain traction for years.

    Let’s not forget that with the introduction of the Apple Watch, those who don’t have a 6 or 6+, would have an opportunity to use ApplePay, without having to work outside of their carrier contracts for a new phone.

    ApplePay will get stronger and stronger over time, give it some time.

    I like Ron’s analogy about the wine 😀

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