COMMENTARY: Can Apple Pay Revive the Mobile Wallet?

In the wake of Apple Inc. announcing Apple Pay, many are wondering if it will serve as a catalyst in the revival of the mobile wallet, and if the migration of payments to the mobile form factor is now at a tipping point. The answers are “yes” and “no.”

Apple has joined Google Inc. and SoftCard with a near-field communication-based (NFC) card emulation solution, making all three solutions compatible. This compatibility means that merchants are no longer thinking about implementing one of these solutions, but rather they are thinking about implementing all three simultaneously. If the value proposition offered by any one provider is insufficient to drive adoption, the combined value of all three solutions could be enough.

Because these three companies have compatible technologies, it would be very difficult for a merchant to support one of these wallets without also supporting the others. This means that if any one of these three wallets can move a merchant to accept, then all three will benefit. Add to that Discover Financial Services, which is also actively involved in setting up to work with Apple Pay. If Discover follows the Apple Pay blueprint, then PayPal Inc. is likely to follow suit, leveraging its relationship with Discover to launch a fourth compatible solution that will further magnify the synergies between the wallet providers.

Apple has also enticed the country’s largest financial institutions to actively promote Apple Pay. Because Softcard and Google have compatible approaches, they will benefit from this promotional activity, as will PayPal when it joins the fray. Because Google Wallet and PayPal already work with cards from any financial institution, holders of cards from any financial institution will be able to pay by mobile at any NFC-equipped merchant. In short, consumer-side ubiquity is nearly here.

Finally, this is all happening at a time when merchants are already being pushed to upgrade for support of the Europay-MasterCard-Visa (EMV) chip card standard. The terminal manufacturers and payment networks have tried to link the futures of NFC and EMV, so a merchant would consider acceptance of EMV cards, Apple Pay, Google Wallet, Softcard, and most likely PayPal, all at the same time. The result is a combined value proposition of increasing strength, and Apple has been an essential catalyst. If ubiquity on the consumer side is here (it nearly is), then won’t merchant-side ubiquity follow?

We’ve spoken with several key executives involved in payment product distribution and believe that we will see a heavy NFC sales effort from independent sales organizations and acquirers. Buzz Stryker of POS Portal summed it up best, saying, “Before Apple Pay it was, ‘Install EMV and get ready for contactless. Now, it’s ‘install contactless and get EMV for free.’”

However, the linkage of EMV and NFC is not absolute. The two technologies still involve distinct implementation efforts for merchants. Thus far, the number of merchants that accept NFC payments has remained small and stagnant, and the nation’s largest merchants, representing about 25% of all electronic payment transactions, have specifically rejected the NFC approach.

Apple did not significantly improve on the previous merchant value propositions offered by other providers. It is therefore still quite possible that merchant adoption will still be tied to consumer demand. Consumer demand has also been underwhelming in other launches, and Apple has not significantly improved on the previous consumer value propositions offered by other providers. So, despite the new energy that Apple has injected, it’s still quite possible that NFC payments will continue to stagnate.

So yes, Apple Pay can revitalize the mobile wallet. But no, the tipping point has not yet been reached.

Todd Ablowitz is president of, and Rick Oglesby is a senior analyst at, Double Diamond Payments Research, Centennial, Colo.