October 20, 2014
By Kevin Woodward
The big news about my test today of Apple Pay, the contactless payment scheme for use with Apple Inc. smart phones and tablets, is that there was no big news. It worked. Each transaction on the first day of availability went through quickly, with a notification popping up on my iPhone 6, and an email receipt in one instance.
My colleague Jim Daly and I set out for three nearby merchants that accept contactless payments: McDonald’s, Walgreens, and Panera. We wanted to see if Apple Pay’s reliance on near-field communication (NFC), a two-way wireless link that lets devices send data back and forth, worked as promised for mobile payments. Would it be quick? Would it be complicated? Would I want to use it?
The answers are mixed. Yes, it worked quickly and required little input. All I had to do was hold the phone near the contactless reader and the prompt appeared on the phone’s screen asking me to authorize the payment via the Touch ID biometric sensor on the iPhone 6. The mobile-payment version of Apple Pay, for use at a point of sale, only works with iPhone 6 and 6 Plus devices, which have NFC chips and the biometric pad. The iPhone 5S, though it has Touch ID, does not have NFC. The one-touch payment function with that device only works with payments made in apps from merchants with integrated Apple Pay capabilities.
Because Apple Pay has no built-in loyalty or rewards integration at this time, I had to manually type in my Walgreens Balance Rewards number. I skipped it because the birthday card for my brother wouldn’t get me any points.
Our next stop was McDonald’s. I ordered a strawberry-banana smoothie and Jim a pop (or soda depending on where you live). After the order was complete, again I held the phone near the reader. I authorized the transaction. There were no problems. It wasn’t an issue that the employee didn’t know what we were doing. I, the consumer, was in control of the payment. That’s no different from a traditional credit or debit card transaction, or even a cash one. The integrity of who controlled the payment was unchanged.
Next was Panera Bread Co. There, our goal was to try the in-app payment function. I opened the Panera app and found a couple of baked goodies for us. Then, in the app, I pressed the Buy with Apple Pay button. Again, the payment went through. We went inside and waited to pick up the order. The only issue here was that no employee had had time to see the order at the printer. In fairness to Panera, the app advises waiting 10 minutes. We waited behind several other patrons, some of whom had very nuanced meals that required special handling. Well, at least it seemed like that judging from how long it took for them to place their orders.
But as soon as it was our turn, we told the employee about the order and she knew where to look. She found the order and put two delicious cookies in bags. We left. It was that simple. No receipt check on the phone. The transaction itself was quick.
The most important lesson from this excursion is that there is a long way to go until the novelty wears off. As with the Panera purchase, the transaction can be as quick and convenient as I prefer, but until more consumers experience that, my time in line will be dependent on others.
That could be a hazard for merchants and for Apple Pay and its backers. Promises of convenience and speed are fine, but payments are one piece of the transaction. Consumers are trained in quick-service restaurants to look up at the menu boards displayed above the cash registers. It might be different with other merchants, such as retailers, that accept contactless payments. Many consumers already have picked out their items by the time they walk up to the checkout in these stores. Still, many more consumers will need to adapt to looking at apps on their smart phones and using them to order before the promises of Apple Pay really pay off.
That will take time. The iPhone 6 and 6 Plus were released a little over a month ago. Millions more will have to be sold. Apple announced last week the newest versions of the iPad Air and iPad mini will have Touch ID and in-app payment capability. Apple Pay only is available on Apple devices, prohibiting consumers with Android smart phones and tablets from using the service.
Another issue with Apple Pay, one that has long been known, even from 10 years ago when the card brands and some issuers proffered contactless cards, is the limited number of places it can be used. There are only 220,000 merchant locations where consumers can make a contactless payment. That’s out of 8 million merchants. But that appears to be improving. Most payment terminals now ship with a built-in contactless capability.
Apple Pay was quick. It was not complicated. (Set up was easy using the iPhone’s camera to capture the card numbers from my credit cards; and each issuer required a verification method to ensure I authorized the Apple Pay use.) But my last question—would I want to use it?—is not completely answered yet. Much will depend on the context. Are the restaurant’s employees filling orders quickly enough so if I use the in-app payment I can be on my way? Or, are consumers using more traditional ways to order, preventing expedited service?
I don’t know yet. It’s going to take time.
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