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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Never Say Never (To Mobile Banking And Payments)

We’re going to survey like it’s 1999. According to an article published on CBS News‘ website:

“In a poll conducted for the ID security firm Intercede, 48% of U.S. consumers surveyed said they would never use bill payment apps, and 44% said they would never use mobile banking services. One in five said they did not feel safe shopping on their smartphone. And 63% said they worry about security on their mobile device.”

Substitute “PC” for “smartphone” and “online” for “mobile” and this survey could have been conducted in 1999.

And although online banking, bill payment, and shopping aren’t quite ubiquitous today, the fact is that a lot of people who once said they would “never” do those activities online (or using a PC) do those activities online (or using a PC) today.

But you wouldn’t expect a news organization to report that, would you? Because that would just deflate the newsworthiness of the findings.


The article goes on to say:

“With so many recent security breaches in the news–from Target to the Heartbleed bug to Russian hackers stealing passwords–Intercede’s CEO said it’s not surprising that consumers just don’t trust mobile security.”

There’s no mention (of course), that few–if any–of the data breaches making the news today have anything to do with mobile devices. Mentioning that would deflate the newsworthiness of the findings.


I don’t care what this survey found. I’m sticking by my prediction that 96 million Americans will use a smartphone or tablet to do their banking by 2016.

Is that everybody? Of course not. Is that everybody that matters? Well, that’s a good question, no?

My forecast could be significantly off, but regardless, the reality is that many people who, today, say that they will never do mobile banking, will do so at some point in the future.


The rate of adoption of new technologies is always impacted by a confluence of factors that are nearly impossible to predict. Factors like personal influences, incentives/disincentives, and unforeseen circumstances:

  • Twenty-five years ago, I consulted to a very large company whose CEO didn’t quite get PCs. Didn’t want one in his office, and couldn’t understand why any of his direct reports needed one on their desks. The IT department wanted to compile statistics on PC adoption and develop models of productivity improvement to persuade the CEO to invest in PCs. My firm’s suggestion was less “scientific.” We said: Give the guy’s grandkids PCs. Which they did. And it worked. The CEOs grandkids pressured Grandpa to get a PC and communicate with them through email. Which became a gateway to him using the PC for other things.


  • Ask some of the large banks about what helped them drive up online bill pay use. Don’t be surprised if they say things like “we paid people to try it” or “we charged people to not use it.” Incentives/disincentives work. Funny thing is, when it comes to mobile banking, the rate of adoption seems to be pretty rapid, so I don’t see many banks or credit unions needing to incentivize/penalize anyone. Maybe Intercede’s survey found something I don’t know.


  • In a survey I conducted a while back, I asked consumers who paid bills online what got them started on that behavior. A fair number responded that they “needed to make a payment to avoid a late fee, and was able to do so online.” So…how many of those people who say they will never make a mobile payment will do so when they need to get on a train, don’t have cash, but could use that MBTA app to easily buy a ticket? Yeah, a bunch.


The lesson here is to take what consumers say (especially in surveys) with a grain of salt. We’re not very good at predicting our own behavior (or explaining why we did what did, for that matter).

Am I damning my own profession? No (freaking) way. The value of what we researchers do is in the analysis of the data, not the data itself. Asking the right questions helps, too.




Mobile Payment Numbers Are Useless

An article on BobsGuide.com, titled Mobile payments increased 19.5% on Cyber Monday, reported that: 

“IBM said online sales during the day increased by 19% compared to 2012. However, retailers catering for mobile shoppers benefitted the most, seeing mobile traffic hitting 30 per cent of total site visits, a rise of more than 58% from last year. Since Thanksgiving, tablets have proved to be more popular for purchases, while mobile phones are preferred for browsing. Tablets accounted for 9.8% of purchases, compared with 5.7% from smartphones, IBM said. Consumers spent more cash when buying on tablets, with average order values hitting $128.30 per order, compared with $110.95 for smartphones, the company said.”

Well, I’m confused. Did online sales grow by 19.5% or did mobile sales grow 19.5% from last year?

If it’s the latter, then I’m really not impressed. The percentage of consumers who own a smartphone increased from about 38% in 2012 to roughly 60% in 2013. If mobile Cyber Monday sales only increased by 20%, that’s not particularly impressive. 

And I’m sure it was just a linguistic convention used by the author of the article, but exactly how did consumers use cash when making purchases from their tablets?


The bigger issue here is what constitutes a mobile payment. Does sitting at home, with a tablet on your lap, using a browser to surf the Web, and buying something constitute a mobile payment?

For that matter, if you’re at home, and you use your smartphone to access a firm’s website, and you buy something, should that count as a mobile purchase?

My take: Device shouldn’t be the only factor determining what constitutes a mobile payment. Location matters.  


To me, a mobile payment is when I’m sitting on the MBTA train in Reading, MA , ready to head into Boston, and I access the MBTA app and buy my ticket before the conductor gets to me.

Or when I access the Uber app from some bar in Atlanta to come pick me up and take me back to my hotel. 

Or when I wave my smartphone in front of some device at Starbucks to pay for the lousy coffee they serve there. 

Those are mobile payments (IMHO). 


My own argument — that location matters — could come back to haunt me.

If I imply that you have to be out-of-home in order for a payment to be considered a mobile payment, then wouldn’t my making a purchase using a PC, accessing wifi, while sitting at the airport, count as a mobile payment?

I guess not, because it’s the wrong device. 

Now, what if I was using my iPad, instead of a PC, would that count?


Bottom line: As long as the numbers being reported include home-based, web-based purchases, I remain skeptical that mobile payment statistics really capture the shift in behavior.

Big Idea: Activity- Based Marketing

Most traditional forms of marketing — TV, radio, print, direct mail — are outbound forms of marketing. I call it push-and-pray marketing: Marketers push out a bunch messages, and pray for a good response rate.

More recently, a different form of marketing has become popular: Inbound marketing. This type of marketing waits for a customer or prospect to make contact with the company, and then applies marketing efforts to that interaction.

But there’s another type of marketing that’s beginning to gain traction. As far as I can tell, there’s no commonly accepted name for it, so for our purposes, i’ll call it Activity-Based Marketing:

Marketing within the context of an activity being performed by a customer or prospect.

Yesterday’s announcement by restaurant chain Chili’s regarding tabletop computer screens is a great example of activity-based marketing: The activity is the process of ordering food.

At its most basic level, asking “would you like fries with that?” is a form of activity-based marketing. You might think of it simply as up-sell or cross-sell — and I would agree — but it doesn’t quite seem like marketing because no principles of marketing (targeting, segmentation, promotion) are applied.

But they could be applied.

That’s the potential of these tabletop computer screens. Not that they just simplify the ordering process. But that they push (i.e., merchandise) certain entrees, track your visits and tell you what you ordered last time, connect you with other diners to see what they like, etc. This technology shouldn’t just streamline the ordering activity — it should transform it.


A narrow-minded banker might think “we already have things like this — ATMs and video tellers.”

Wrong. Those deal with service transactions and interactions. These aren’t the “activities” I’m talking about. I’m talking about activities like car-buying, house-shopping, and ticket-purchasing, or even shopping for more mundane items like shoes (that was a joke, guys — the ladies <at least the ones in my family>, hardly consider shoes to be “mundane”).

There are a number of great examples of financial institutions doing activity-based marketing:

1. USAA. USAA’s Auto Circle app changes the car buying process by providing car shoppers with an app that lets them search for the type of car they want, track those cars for future reference and comparison, get a loan for the car when they’re ready to buy it, and insure it as well. Transformation of the car-buying activity or process.

mobile apps

2. Commonwealth Bank. This Australian bank’s app uses augmented reality technology to let a user “take a picture” of a home or building, determine the location, access the realtor database, and display the price and details of the home if it’s for sale. This app enables Commonwealth to identify potential mortgage customers long before they were able to do so in the past.

I don’t know if Commonwealth is doing this or not, but the app could give other marketers — those interested in reaching new movers (who typically spend thousands of dollars in the six months after moving) — an opportunity to reach prospects even before they move, enabling Commonwealth to generate advertising revenue.

mobile apps

3. Caixa Bank. Caixa Bank in Spain has developed an app that let consumers buy tickets (movies, sports, etc.) using their mobile device. Transforms the ticket-buying activity.

mobile apps

There are other activity-based marketing apps that I can envision, but won’t belabor the point here.


One of the common threads in the examples above is the creation of a new point of interaction for banks.

Historically, banks’ point of interaction with customers or prospects is the point of purchase — when the consumer is ready to buy the house and now needs to find a loan, or when the consumer is sitting down with the car dealer negotiating price.

For a host of other types of purchases, banks’ point of interaction is when the consumers swipes their debit or credit card, or — even worse — after the transaction itself, when the check clears.

Activity-based marketing changes the point of interaction for banks, moving that point much closer to the identification of the need or want for the product or service.

20131030 POI

Moving that point of interaction gives banks more opportunity to influence the choice of providers. But it does so in a way that provides huge value to the consumer by transforming the overall activity.

Wanna know why Google is worth gazillions? Because its point of interaction is so close to the consumer’s identification of the need or want for a product.


Brett King was spot-on when he wrote, in a post title When Payments Disappear, and Value Emerges:

“Arguing over whether a payment is truly mobile or something else is a lost argument. When a payment ultimately works, no one is going to care how it happened. As long as it happened seamlessly with minimum fuss, and maximum context or value. When the payment disappears, it doesn’t matter how you paid, it matters what the payment did for you.”

The challenge for banks is: How do you get value to emerge? The answer is activity-based marketing.


What this also demonstrates, however, is the narrow-mindedness of too many bankers. Namely, those worried about what channel the order is taken in. 

So what if the mortgage application is taken online or in the branch? It doesn’t matter — as long as your FI gets the application.

And how are you going to ensure that your FI gets the application? By getting involved in the shopping process as early as possible. 

Activity-based marketing is going to be big. 

Top Of Phone Wallet

Credit card marketers are well versed in the concept of the “top of wallet” card.  The idea is simple: With so many Americans walking around with multiple credit (and now debit and prepaid) cards, issuers want their card to be top of wallet — the one that consumers pull out most often when paying for something. 

Although current interest in digital wallets among US consumers is pretty low, there’s a new competitive dynamic that will emerge over the next few years: The desire among providers to be the “top of phone” (digital) wallet. 


Digital wallets will try to influence consumers’ choice of payment mechanism, as well as what they buy and where. The development of the digital wallet ecosystem — the FIs, merchants/retailers, telcos, and technology companies — will be a critical determinant of what functionality will be provided, how effective the wallet is, and who will and won’t succeed with their digital wallet offering.

If you’re developing a digital wallet today and expect that card emulation is the goal here, you should go back to sleep. If your digital wallet simply stores card numbers, and passwords/IDs and things like that, lean in a little closer so I can smack you upside your head. 


It’s going to take a while for this competitive dynamic to emerge, though.

I already have six wallet apps on my iPhone. Don’t use any of them. Don’t really know what they do, can do, or should be able to do. 

If you’re reading this, it’s a good chance you’re not normal. No wait, bad choice of words — make that you’re not “average.” You’re probably chomping on the bit to use digital wallets. 

You can loosen your grip on the reins, Bucko, because that horse is trotting — not galloping. 


Digital wallets are to 2012 what account aggregation was to 2002. 

Back then, when we asked consumers if they wanted account aggregation, they said no. What they were thinking, however, was “WTF are you talking about?”

Some FIs (and at least one technology company) thought back then that account aggregation was something they could charge customers for because they (only somewhat correctly) thought it was painful for consumers to get a consolidated view of their financial lives. 

People didn’t know what account aggregation was back then, and they probably don’t know what it is today, either. What do they know, however, is that their bank or credit union offers something called PFM which gives them an opportunity to link some accounts and see their financial picture. 

It’s not account aggregation they’re “buying” into — it’s the ability to see a consolidated picture. Account aggregation is infrastructure. 


This is what’s going to happen with digital wallets. 

Nobody really knows what a digital wallet is — there is no standard, predefined, agreed-upon set of functionality. 

Sure, the visionary early adopters — like you — think you know what it is, and what you want it to be. 

But the rest of us don’t. 

One flavor of digital wallet may be Wallabyesque and help consumers choose which card — oops, I mean “funding account” — to use for a particular purpose. 

Another flavor of wallet might focus on protecting and securing someone’s personal information when making mobile payments, and sharing only a specified amount of information with the merchant when making a transaction. 


Bottom line: The key point is that we’re early in the evolution of digital wallets, but as they mature, different flavors will emerge. The battle will focus on getting your wallet to be the one the most consumers use (in practice, they’re not really going to want to use three or four wallets every day — they may download that many, but not actively them). In turn, that will likely drive choice of funding account. Have fun competing. 

Banks’ Mobile Challenge

At the risk of ticking off or alienating any of my friends (like I have any) or other people that I have a great deal of respect for, I have a confession to make:

I am sick and tired of hearing people warn banks that if they don’t [innovate/use social media/etc.] they’re going to disappear, or be disrupted, or whatever.

Sorry to be blunt, but any idiot can come up with that claim. And plenty of idiots do. Sadly, a lot of smart people make these claims, and that’s what ticks me off.

What banks (and credit unions) need is good advice, not apocalyptic warnings.

I may or may not be able to provide valuable advice (after all, I didn’t say I wasn’t an idiot). But what I do think I can provide is a little more focus on the problem than simply spouting dire admonitions.

The question that banks need to answer is simple (not that there is a simple answer):

Where in the mobile customer experience do banks add value?

Take a look at the picture below. Many thanks to Jaime Punishill who I stole this picture from.

In this picture, Kelly is out shopping, when she sees a pair of shoes that she wants.

A number of questions immediately pop into her head: How much do these shoes cost? Can I get them cheaper somewhere else? Do any of my friends have these shoes, and what do they think of them?  Possibly — but not necessarily — Kelly might also ask: Can I afford them?

In the old world of shopping, Kelly would had to have gone into the store to check the price, then go home, and search other retailers’ sites to see if they carried the shoes and what they sold them for (in the OLD old world of shopping, she couldn’t even have done that), and call around to her friends to get their opinions.

What I’m not sure a lot of banks understand just yet is that mobile shopping is more important than mobile banking or mobile payments.

In the new world of mobile shopping, banks must figure out how to add value in this process beyond “checking balances” prior to the transaction, and being the “payment mechanism (mobile device or not) at the culmination of the transaction.

The potential areas to add value, as I see it, lie in answering questions like:

    • Can Kelly afford it?
    • What will this do to Kelly’s budget if she buys this?
    • Which payment method should Kelly use?
    • Which payment method(s) do FIs want Kelly to use?

Answering the first question is fairly straightforward. Does Kelly have the money in her account or not?

Answering the second question is a little more tricky. It presumes that Kelly has used the FI’s PFM offering to set up a budget, and/or categorizes her expenses to enable the FI to provide some analysis. Although many FIs are moving in the direction of making their PFM offering mobile-enabled, answering this question — at the point of sale — is not that easy.

The third question is where the realm of possibilities leapfrogs what is currently available. With a mobile wallet that stores multiple payment methods, conceivably an FI could make recommendations on which account (e.g., checking account, credit card, or other account) would be best to use based on the account balance, rewards, and other criteria.

But even more value can be added if FIs could compete, in real time, for Kelly’s business. Perhaps American Express would offer Kelly an additional 5% discount if she uses her Amex card instead of her debit card. Perhaps her bank would offer her 50% off the cost of the purchase if she applies for a credit card (and is approved, of course).

There are probably many more questions that could be addressed. But my advice (helpful or not) to banks and credit unions is this:

The mobile challenge in front of you is determining where you add value in the mobile shopping experience.

Many mobile banking functions are just the porting of existing capabilities to the new channel. And success in mobile payments is dependent on adding value to the mobile shopping experience.

I hope this is a little more specific than “banks are going to disappear if they don’t innovate!” And I apologize to those of you who have said that. I know you know who you are.

Dissecting The Demand For Mobile Payments

In an article titled Consumers Show Cautious Interest In Mobile Payments, Payments Source reports on one study of US consumers’ views on mobile payments which found that:

  • Consumers are “clearly ready for a change,” as 27% of consumers “never” use checks.
  • One in three U.S. adults is interested in mobile and Near Field Communication-based payments.
  • 83% of respondents cited security as the most important factor affecting their interest in mobile payments.
  • 62% of respondents prefer financial institutions to take the lead on new payment methods instead of wireless or Internet companies.

My take: Concluding that consumers are “cautious” in their interest in mobile payments is a misinterpretation of the data.


First of all, concluding that, because one in four never uses checks, consumers are “ready for a change”  misses the point: Consumers have already changed. They’ve shifted their payments behavior away from checks to debit cards, and yes, cash.

The other points, however, all relate to something I’ve called the Blepfard Effect (don’t ask me how I came up with that name):

Asking people to imagine a situation, a state of mind, or something that they can’t possibly imagine because they have no basis of experience to do so.

When we ask consumers about something that doesn’t exist for them — which, for all intents and purposes, mobile payments applies — we don’t, and actually can’t, get a reliable picture of future behavior.

Few consumers are interested in Near Field Communication-based payments because to the Average Joe on the street NFC = National Football Conference.

Many consumers cite security as the most important factor affecting their interest in mobile payments because they have no idea what it is, how it works, and don’t know what other factors should or could be affecting their interest in mobile payments.

A majority of consumers prefer FIs to take the lead on new payment methods instead of wireless or Internet companies because they don’t know what “take the lead on new payment methods” mean.


Looking at the market for mobile payments as a whole misses something: The segment of consumers that I call Smartphonatics:

Consumers who change their shopping and payment behavior as a result of owning a smartphone.

Despite the proliferation of smartphones in the US, not everyone who owns one is a Smartphonatic (smart-fa-NAT-ic). But this group is growing, and their buying power is disproportionately higher than their numbers. They’re mostly young, and relatively affluent (for their age).

In a few weeks, Aite Group will publish a report on the The Global Rise of Smartphonatics: Driving Mobile Payment and Banking Adoption based on a study of consumers in 14 countries in the Americas, EMEA, and Asia/Pacific.

Two of the key points in the report:

Smartphonatic penetration varies by country, and represents its mobile maturity level. William Gibson once said that the future is already here, it’s just unevenly distributed. That describes the interest in mobile payments perfectly. The differences in the various countries’ Smartphonatic population is a reflection of the evolution of the mobile channel in each country — and not a reflection of innate differences in attitudes and behaviors of the country’s citizens.  

Demand for mobile payments isn’t “cautious.” There’s a segment of the population that is chomping at the bit to use mobile payments. And there’s a segment that couldn’t care less — for right now. There are early adopters and later adopters — but “cautious” isn’t an appropriate descriptor.