An Experiment in Delayed Gratification? Waiting for Apple Pay Globally
Date: September 16, 2014
Despite global interest in its newly launched iPhone 6 and Apple Watch (the iWatch), Apple has announced that its much anticipated mobile payment feature, Apple Pay, will only be available to consumers in the United States initially. Consumers around the world are expected to have to wait until 2015 at the earliest. Since a technology giant like Apple is capable of launching a service like Apple Pay globally from the start, the decision to focus first on the American market raises the question whether that focus is intended simply to cultivate interest in the service before deploying it around the world.
While the notion of Apple experimenting with a tactic of delayed gratification for consumers around the world is intriguing, in reality the focus on the U.S. market is more likely based on the fact that Apple Pay faces considerably less competition in the U.S. in the form of other mobile payment service providers or the increasingly popular contactless payment card form factor.
The broader global payments industry has been waiting for a feature like Apple Pay to promote growth of mobile payment use around the world. In the meantime, a range of industry participants have attempted to launch mobile payment services to capture consumer interest in new payment forms. Although the majority of mobile payment services have succeeded in generating only relatively small transaction volume, certain players like M-Pesa (owned by international mobile network operator Vodafone) and Chinese third-party payment service provider Alipay (the payments affiliate of Alibaba) have generated substantial volume. For example, in Kenya in 2013, around 43% of the country’s gross domestic product flowed through the M-Pesa system. In China in February 2014, Alipay announced that it is handling approximately 18 million payments each day; transaction volume reached $148 billion in 2013. Though few international markets have competitors on the scale of Alipay and M-Pesa, significantly more competition globally than in the U.S. could well be a factor in Apple’s decision to first deploy Apple Pay in the United States.
Given that Apple Pay includes Near Field Communication (NFC) technology, it is surprising that its initial deployment did not include Europe, where penetration of NFC-enabled point-of-sale (POS) terminals and NFC-enabled cards is far deeper than in the U.S. However, another reason for Apple’s decision to wait until 2015 to deploy the service globally is likely the enormous growth in volume of contactless payments (via payment cards), in the past year especially, as well as the recent announcement by MasterCard of a mandatory migration to EMV that will see all European merchants POS terminals EMV enabled by 2020. While Apple may consider this development a useful steppingstone, preferring to capitalize on the growing contactless momentum, it does risk creating a more uphill struggle to encourage consumers to switch from payment cards to mobile phones as the primary method of payment.
The decision not to roll out Apple Pay globally at the outset is likely the result of many factors. The prospect of increased competition and an uphill struggle to counter the increasingly popular contactless payment type makes the decision to start in the U.S. and generate momentum before international expansion more understandable. Thanks to the publicity and consumer awareness of mobile payments due to the Apple Pay launch, when the service is eventually deployed around the world it will likely result in increased mobile payment adoption and use by consumers whether through Apple Pay or through another mobile payment service like M-Pesa and Alipay.