Tim Cook, CEO of Apple, said that 2015 would be the year of Apple Pay. As it turned out, 2015 was the year of mobile payments initiatives generally as technology companies, retailers and banks all jostled to bring in-store mobile payments to the masses.
Handset manufacturers have head-start
Apple Pay launched in the US in 2014 and in the UK in July 2015. Given the downward pressure on interchange, Apple found it hard to cut deals with banks outside the US. Although the service was rolled out in Canada and Australia, it was only to American Express cardholders. Further roll-outs to Amex cardholders are expected in Spain, Singapore and Hong Kong this year.
Apple Pay usage is still at the nascent stage. Phoenix Marketing International, a research firm, estimated that 14 percent of US households with credit cards had signed up for Apple Pay. And only a third of iPhone users had a model new enough to use the system. In the UK, only around 3 percent of iPhone 6 users were regularly using Apple Pay a month after launch, according to national media reports. To incentivise use, MasterCard undertook a promotion with Transport for London in November/December 2015, allowing free travel on 4 Mondays for those using Apple Pay with a MasterCard.
Samsung launched Samsung Pay in South Korea and the US during 2015. An expansion of the service to more handset types as well as to online shoppers in the US is expected this year.
Both Apple and Samsung separately announced work with China UnionPay to launch in China this year. With an addressable population for mobile services of around 1.1 billion Chinese, the opportunity is huge — as is the competition from incumbents, such as Alipay and Tenpay.
Meanwhile Microsoft is gearing up to launch its own mobile payment option for Windows phones and tablets. And Korean manufacturer LG announced via Facebook in November 2015 that it was preparing for the launch of LG Pay.
Retailers get in on the action
Retailers are also getting in on the mobile payments action to protect revenue, relevance and customer relationships. Amazon is planning to allow in-app payment at third party mobile apps using credentials it holds on file. Target, the fourth largest retailer in the US, is rumoured to be working with card schemes on a mobile payments service, involving QR-code scanning.
Meanwhile Walmart stole a march on its rivals with the launch of Walmart Pay in December 2015. Currently being trialled, a full roll-out to 22 million Walmart app users is expected in the first half of this year.
Walmart is a member of the Merchant Customer Exchange (MCX), a retailer-backed mobile payments group behind the much-delayed CurrentC app. However, Chase Pay from JPMorgan Chase has emerged as a payment partner for MCX. Chase Pay will be available in mid-2016 to 94 million Chase customers at participating MCX retailers.
One of the most intriguing announcements in the retail space has been OmnyPay, a firm headquartered in San Francisco and led by former VeriFone executives. A media statement timed to coincide with the Money 20/20 event in Las Vegas last October did not pull its punches.
OmnyPay is billed as an integrated mobile, loyalty, rewards and payment system designed specifically for retailers for the “last inch” of the mobile payments process. OmnyPay recognises that retailers have had a “challenging relationship with credit and bank card companies, whose control over the mobile payment process has been costly to retailers.” Referencing the “handsome transactions fees” collected by card companies, “intermediaries” and the “third-party relationships retailers [have]with their own customers”, the statement sounds akin to a manifesto for an anti-establishment cryptocurrency.
OmnyPay’s solution promises coverage by supporting all iOS and Android devices, including the iPhone 5. It allows the retailer to brand the app themselves and offer all payment types (ACH, private label, store, credit and debit cards), whilst enabling them to “incentivise shoppers to use the payment type that works best and has the lowest cost for the retailer.” OmnyPay partners, launch dates and targets were not provided.
Looking to the future…
Are payment cards dead as consumers demand to pay with their phones? Probably not, but calling to mind Henry Ford’s famous quip about faster horses, consumers may not be reliable sources for future innovation. There will be more mobile payments launches before there is consolidation and the leaders emerge. Even then, appeal is likely to be niche with marketshare not on a par with that of the major card brands.