Mobile payments don't depend on Apple, but Apple will soon depend on mobile payments
As per the last count (and I keep track of this stuff) there are 47 misconceptions, misunderstandings, and myths about Apple when it comes to mobile payments. I’m not going to bore you with all 47, but we can hit the highlights on three which have recently been brought to the forefront.
1. Apple CEO Tim Cook says mobile payments are in their infancy. *buzz* Wrong!
Actually, mobile payments are at the precipice of mass adoption. Just consider a few things which grew and evolved over the past few years. Currently, 20 of the top 20 banking institutions offer mobile payments in some way. All the top card associations such as Visa and MasterCard have a commercial-grade offering for mobile payments that can be used today. There are now millions of payment terminals available today to be used on over 200 million phones capable of offering mobile payments on nearly one-sixth of all major retail POS terminals in the U.S. — and that’s not counting the rest of the world. All top-50 mobile carriers around the world have fully committed to mobile payments. I personally have been using my mobile wallet to pay at the supermarket, pharmacy, vending machines, restaurants and so much more for a few years.In the coming months, we’ll have half a billion phones able to do mobile payments in the physical world in millions of retail locations.
Infancy is early childhood, but mobile payments as we know them today, have been around for over a decade and are basically an "on/off switch" away from being used by hundreds of millions of people. What's more, 99.9 percent of the technical details have been worked out. We’ve had thousands of test runs. The majority of phones in the past 12 months have the capability. Retailers are now being mandated to offer mobile payments. All the major players in payment are fully committed and actually launching.
So, infancy? I’d say mobile payments are in their teen years: ready to graduate into the real world.
2. 500 million iTunes accounts mean something. *buzz* Wrong again!
I keep hearing people bringing up the fact that Apple, via iTunes, has a few hundred million payment cards so they are perfectly aligned to succeed and drive mobile payments forward. But let’s look at the reality. Paypal has over 100 million payment cards linked to accounts. Amazon has a very high number of payment cards linked to user accounts.
But what does having a bunch of users with payment credentials linked to an account really mean to mobile payments? The answer is absolutely nothing.
The average consumer in the U.S. has a total of 16 unique payment cards. Of those, they have linked at least one of those cards to a long list of recurring payment situations from paying their phone bill to paying for gym memberships. Just because Apple has a few hundred million accounts with payment credentials means nothing. If you spread those out, you would see that the penetration of all those iTunes accounts is too low to actually mean something to brick and mortar retail locations.
On a planet with 7.5 billion people, you might think Apple is king. But the reality is that they don’t even represent 10 percent of most markets. And it’s easy enough to get people to sign up with a payment card to a payment charging account. So Apple’s iTunes situation doesn’t really give them an edge. Maybe it did three years ago, but today things are very different and the competition is already outpacing Apple.
This leads to another common misconception connected to iTunes (call it a bonus misconception), namely that Apple has the numbers, power, and influence to get mobile payment to explode. Those who make this argument correlate what Apple did with music.
While iTunes has changed many things in music and media, the circumstances around that success was more about good timing for Apple than Apple being the best bet. At the time, piracy of content was rampant. (Remember Napster?) The music industry knew they had to go digital or die. Also at the time, the majority of digital music players where controlled by one company, Apple, and the music industry was controlled by five companies. In other words, Apple had the devices, the market opportunity and only had to negotiate with five companies to really take that opportunity to the next level.
Compare that with payments. There, Apple doesn’t control all the devices. They also have to follow a variety of banking regulations they didn’t have to deal with when it came to music. And instead of negotiating with five companies, if they were to introduce their own payment offering they would have to deal with thousands of banks, brands, processors, merchants and issuers.
And that’s just the major players. There are millions of retailers and restaurants who are small businesses.
Music didn’t require lots of infrastructure and the liability was basically near zero. Payments, on the other hand, involve real liability, complex infrastructure and multiple industry segments and players.
3. Retailers need the iPhone to get mass adoption. *buzz* Wrong. Strike 3!
Apple’s real power has been great marketing. But no amount of marketing has hidden the reality of the numbers. The most recent numbers show that Apple has begun to slow and even decline in iPhone sales in many markets. The last two iPhones where considered big disappointments. They have taken desperate measures to sue competition, mainly to block them from markets.
The reality is that Apple's market share is in the single digits around the world when it comes to overall phones. Most of its competition, such as Samsung and LG, has had double digit growth and more; while Apple has declined in many markets. The key demographics of users who would actually use mobile payments have begun to switch from iPhone to Android.
When Apple was in its heyday, it didn’t have mobile phone ubiquity but it seemed like every major retailer was coming out with an Apple app. Now retailers have iPhone apps as well as Android app. And every major competitor to Apple is currently shipping phones that have the ability to do mainstream mobile payments at the millions of point of sale terminals out today.
Retailers didn’t wait for ubiquity to jump on the Apple bandwagon years ago, and they're not waiting on "ubiquity" now.
The one-sixth of payment terminals in the U.S. that are mobile payments capable represent nearly half of all daily commerce in the U.S. That's closer to ubiquity and apple bet wrong and will now pay the price.
At the end of the day, the real question about mobile payments is, “Will Apple’s marketing convince you that mobile payments needs them, or will the actual numbers convince you that Apple is late to the game and is missing the boat?”
Einar Rosenberg Einar Rosenberg is a recognized expert in mobile payments who has written multiple papers and spoken internationally on the topics of NFC, RFID, location-based services and Bluetooth. Mr. Rosenberg is currently the CTO of Narian Technologies.