Is Apple Pay Fixing a Problem Consumers Don’t Have?

simple-apple-logoThe past few weeks have been all about Apple. Beyond bending screens and a tighter fit into my skinny jeans, big iPhones have big implications for local advertising. But it’s not just about real estate for larger banners, as many have guessed.

Capturing and sharing multimedia with increasingly powerful optics is a growing mobile use case. So moving to larger screens to consume that media is a natural progression. And we’ll see app developers do some cool things to utilize a larger screen. So effective ad strategies will take a holistic approach with formats that are native to a bigger screen — rather than just making banners larger. This flows into mobile local advertising because we’re already moving past its banner-centric first phase.

As discussed in the previous column, content marketing is one offshoot of this social sharing trend. So we see advertisers playing with multimedia such as Instagram product photos against a sunset, or Yelp videos capturing restaurant ambiance.

But the real local story isn’t bigger iPhones; it’s Apple Pay. Mobile payments have a long-unfulfilled promise to close the attribution loop on local advertising. Unfortunately, that won’t be the case with Apple Pay, at least in its current form. This is partly due to its choice to use NFC. We’ve seen this technology struggle for years due to a classic chicken and egg scenario. Merchants won’t invest in costly point of sale terminals (POS) without a critical mass of usage.

The thought is that Apple has jumpstarted the latter. But has it really? We’re at least a year from NFC-packing iPhone 6 ubiquity — at least a to level that’s going put a dent in retailers’ business case to upgrade POS hardware. The mismatch in this two sided marketplace — requiring network effect to get over a compatibility hump — will be further dampened by the simple fact that no one is clamoring for this solution to a problem that doesn’t exist.

In other words, paying with a credit card isn’t broken. The mobile payment industry seems to be in perpetual denial on this point, which has eviscerated every other attempt. I was hoping Apple would avoid it.

Mobile payments have to offer something greater than reducing my wallet by the atomic weight of a credit card. We’re talking tangible benefits like skipping store lines, saving time, or monetary rewards. Because Apple Pay doesn’t track purchase history, it handicaps the data backbone for a loyalty/rewards program. It also works against advertising attribution, mentioned above as an long-anticipated outcome.

Without these benefits, I don’t see how the masses will be compelled to change such an entrenched habit. There are high psychological switching costs in areas where comfort levels (i.e. security) are so deeply rooted.

That might actually be Apple Pay’s biggest strength. It’s highly encrypted and more secure than plastic. Store associates or restaurant servers can’t see the numbers, bypassing today’s greatest source of credit card fraud.

It also should be noted in fairness that Apple landed several retail partners. But that could be its classic halo effect; the same reason brands lined up for iAd after its shiny unveiling. We all saw what happened next.

Speaking as an avid Apple user, I want to root for Apple Pay. But it may be a ghost town for a while. I predict YouTube videos of POS mishaps and confusion. That won’t be quite as good for PR as its sparkling keynote launch.

Version two could come closer to the target, much like Apple TV, Maps, and lots of others. It’s important because Apple Pay has the potential to impact local more than any other Apple product since the iPhone itself. Just not yet.

speaker_MichaelBolandMichael Boland is chief analyst and VP of content at BIA/Kelsey. Previously, he was a tech journalist for Forbes, Red Herring, Business 2.0, and other outlets.

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Mike Boland is Street Fight's lead analyst, author of the Road Map column and producer of the Heard on the Street podcast. He has been an analyst in the local space since 2005, covering mobile, social and emerging tech. More biographical information can be seen at www.mikebo.land
  1. Erik Stenson
    October 6, 2014

    fraud isn’t really a problem for consumers. it’s is on the credit card or merchant. I could see apple pay hurting consumers where fraud is involved because there is no signature – the authorization is in then phone. so if that were to be hacked or spoofed (simple to do with touchid and fingerprint copy) you could have little recourse.

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