A year after its launch, Apple Pay has seen some significant growth in the U.S. and has now expanded to the UK. There are plans for additional launches in Canada and Australia later this year, and expansion into Spain, Singapore and Hong Kong in 2016 -- though only American Express has been identified as a partner in those markets.
The U.S. remains the primary market for Apple Pay, with all major card issuers and thousands of banks now supporting the platform. Even here, however, Apple Pay is far from ubiquitous.
Despite interest in the platform, only about 14% of US households have linked a card to Apple Pay, according to recent research from Phoenix Marketing International, up just a few percentage points from the 11% the company reported at the beginning of 2015. Phoenix Marketing International also notes that while Apple Pay users are keen on using it to make purchases, nearly half said that they'd encountered stores where they weren't able to do so.
Although Apple has done a fairly good job getting major retail and restaurant chains on board with Apple Pay, it'll be a while before any Apple Pay user will feel comfortable leaving the house to go shopping without a wallet. Apple's growing list of retail partners represents a smart starting point, but the reality is that shopping at large chains represents only a fraction of retail encounters.
Small businesses and Apple Pay
Small businesses and regional chains make up a significant number of purchases -- and a great many are unlikely to ever find themselves listed on Apple's website. They are also far less likely to have Apple directly marketing the service to them as a payment option. That puts the burden of spreading information about Apple Pay's availability to merchants themselves, who will need to investigate options, or on credit card processing firms.
One smart move Apple made in launching Apple Pay in the US involved the timing. To encourage adoption of more secure EMV chip cards, the credit card industry recently pushed ahead with a liability shift that places the burden of fraud onto merchants that haven't upgraded their processing terminals to accept the new cards, which are common in most other countries. Timing the Apple Pay launch ahead of that move means merchants upgrading their in-store hardware can choose a terminal that supports chip cards and NFC-based payment technologies like Apple Pay (and the more recent Android Pay). That makes the upgrade less burdensome, and more likely, than if merchants were asked to do so just so they could accept Apple Pay.
One business that made that choice recently is Crush and Cask Wine and Spirits in Saratoga Springs, N.Y., where I recently spied an Apple Pay sticker hanging just below the one listing the credit cards accepted. I had the distinction of using my Apple Watch to make the store's first Apple Pay sale.
As owner Patricia Pendergast Novo explained, the store wanted to accommodate the various ways customers want to pay. I checked back with Novo and her husband Jeff a couple of weeks later, and found I wasn't their only Apple Pay customer; they had had about a dozen. (So far, I've been the only one to pay using an Apple Watch, but other Apple Pay users were excited they had the option.)
One favorite anecdote: Novo was explaining Apple Pay to an employee, and pointed out that "anyone using Apple Pay will know how to use it." That's a testament both to the platform's ease of use and to the desire by consumers to use it.
Mobile card readers and Apple Pay
Even small businesses that rely on mobile card readers from companies like Square and PayPal will be able to accept Apple Pay. Square's contactless and chip reader costs $49, though that's offset by $49 in free transaction processing. PayPal is offering a similar reader for $149, with a rebate of $100 for merchants that process $3,000 worth of transactions within three months.
This is another smart move in broadening support for Apple Pay and it will allow a wider range of retailers and service providers to accept Apple Pay transactions. Again, the recent liability shift acts as a powerful upgrade incentive for any company using these devices, particularly since the cost will be relatively minor.
Getting the word out
Knowing where you can and can't use Apple Pay is a major issue. Apple has authorized Apple Pay stickers, like the one at Crush and Cask (they also have one on the cash register in case you miss the one on the door). That kind of signage is important, and Apple along with credit card processors should be urging small and regional businesses to use the sticker. The reason is simple. Apple Pay is still relatively new and novel. It's natural to assume that the ability to use it is limited. Without some outward sign, many people will simply assume a store or venue doesn't accept it.
This contrasts with another small business, where I was only told they accepted Apple Pay when a cashier mentioned it after noticing my Apple Watch.
Ironically, this lack of signage isn't limited to small businesses. Even national chains that participated in the launch of Apple Pay don't always make it obvious that it's accepted. Rite Aid, which initially opposed Apple Pay before changing course to accept both it and Android Pay, seems to be one major exception. Every Rite Aid I've visited lately has had a sign at the registers highlighting access to both Apple Pay and Android Pay.
Widespread use means many moving parts
Without a doubt, launching Apple Pay was a major undertaking for Apple, the credit card companies and banks. What we're now seeing is that there are many more moving parts and players in making it a mainstream payment option. There needs to be buy-in from major chains as well as small business.
Credit card processors, be they mobile processors like Square or more established retail-focused companies, need to position Apple Pay to merchants as a next-generation payment option that in itself has the potential to attract and retain customers. After all, if you're excited to be able to use Apple Pay, you're likely to keep patronizing merchants that accept it.
There also needs to be a push for greater awareness of where Apple Pay is accepted. That can come from a variety of sources, including Apple, merchants themselves, and even outside parties.
There also needs to be a push for awareness on the part of Apple Pay users. Asking small businesses whether they accept Apple Pay will encourage its awareness and potentially encourage adoption. You may even find out that stores not advertising it actually do accept it.
Not all of these moving parts are working in harmony right now, which is the big reason that Apple Pay's growth hasn't been as explosive as might have been expected. There does, however, seem to be a coming together of the key pieces of the puzzle, particularly since the liability shift at the beginning of October. All in all, the outlook is positive. But it will take some time before Apple Pay is readily accepted every place you need to pay for something.