By Ray Birch
TAMPA, Fla.—October 20, 2017 will mark the three-year anniversary of the launch of Apple Pay, which heralded a new era in payments channels. But that date is also when many of the contracts signed by credit unions that rushed to be part of the new payments alternative will be coming up for renewal.
While the hype and interest in Apple Pay—and all the other “pays” that quickly followed—is not what it was as the new offering was being rolled out, and consumer interest in digital wallets remains well below projections, one expert says it is not time to reconsider participation in Apple Pay, or any of the other digital wallets.
Lou Grilli, director of payments strategy at CSCU, said that even the price paid to Apple—the half penny for every debit transaction or 0.15% of every credit transaction conducted through Apple Pay—is still worth the investment.
“Yes, I recall those financial institutions, mostly larger or forward-thinking credit unions and banks, that wanted to be on the forefront of what was highly touted to be the evolution to the long-awaited ‘year of the mobile payments,’” said Grilli, who acknowledged that year has never arrived.
Mass-Enablement Campaign
Despite the absence of the hype in 2014, Grilli said CSCU believes in digital wallets to the point it has embarked on a mass-enablement campaign to encourage “a kind of sweeping use of digital wallets and tokenization. We want to help these credit unions that are not in digital wallets get on board with the pays—help them with tokenization of their BINS, uploading of the card art, getting those BINs registered with a token service provider… We firmly believe it is now just as important, if not more important, to do so.”
Grilli said that one of the biggest reasons for the low interest in digital wallets is that consumers have yet to see a real advantage of using their phone to tap-and-go over swiping or dipping their cards. Some analysts had initially suggested that the appeal of tap-and-go might increase as clunky processing of EMV cards slowed checkout lines, but chip card payment speed has improved since the October 2015 liability shift deadline.
Studies have shown that while initial adoption of Apple Pay is steady, where it has fallen well short is in getting those who use it once to use it repeatedly. There is also the matter of NFC-capable POS terminals not being in place at all retailers.
Lou Grilli
“And I always have my plastic cards in my wallet,” said Grilli, adding that the issue that first faced Apple Pay—few NFC terminals—is going away as many more tap-and-go POS devices are now in place.
But the big future for digital wallets, said Grilli, is with e-commerce and in-app payments.
Apple Pay has seen its greatest success with in-app and in-browser uses, noted Grilli.
“eCommerce merchants have always grappled with cart abandonment. Likewise, mobile ordering apps should incent potential users to overcome the hassle of entering a card number, the expiry, the CVV, and possibly wait for a confirmation code from the issuer authenticating the card,” he said. “Apple Pay eliminates all of that, as Apple said in their initial press statement, ‘with the touch of a finger.’ Many survey respondents, when asked if they have used Apple Pay in stores recently, may not even be thinking about how often they used Apple Pay on their mobile device to pay for Uber or Lyft, Grubhub, Dunkin Donuts, myDisneyExperience, Bestbuy.com or any of the literally hundreds of apps and browsers.”
Not Time To Back Out
Again Grilli emphasized he believes it is not time to consider backing out of Apple Pay contracts, despite the extra transaction costs.
“I tell issuers that if your card is not enabled for Apple Pay, or you pull it out of Apple Pay, some of your members are going to load another card in Apple Pay,” said Grilli. “And these may likely be the tech-savvy ones, possibly higher-spending members. You don’t want to send these people off to other issuers.”
And the extra money paid to Apple per tap?
“There really has not been a huge outflow of dollars to Apple Pay here, and that is largely due to its limited use so far,” said Grilli. “So, if issuers feared a huge outflow of dollars to Apple for their cut of each credit and debit transaction, those fears were unfounded.”