July 9, 2015
At the beginning of the year, Forrester made the call that the future of mobile wallets lies beyond payments. By adding marketing value beyond payments — such as integration of loyalty rewards, coupons and many other services, wallets will become marketing platforms complementing merchants' own integrated apps.
Consumers want a better shopping experience, not better payment systems. By adding support for rewards programs (from the likes of Walgreens or Kohl’s) and store-issued credit and debit cards, Apple will make this fall a first step in building a more integrated mobile wallet. The rebranding of Passbook to Wallet represents an explicit push by Apple toward a more comprehensive, consumer-friendly solution.
Less than a year after launching in the US, consumer adoption of Apple Pay is modest but encouraging, all the more Apple Pay has quickly become a trusted solution.
I believe adoption in the UK will be faster than in the US for a number of different reasons:
- The NFC and contactless ecosystem is much more mature in the UK.
- There is no consortium of retailers like MCX with ConcurC led by Walmart willing to launch a competing offering. That said, Zapp is likely to be main competing service when it launches in October with the backing of Sainsbury’s, Asda, House of Fraser, Thomas Cook, HSBC, First Direct, Nationwide, and Santander. Barclays, the one major UK bank not backing Apple Pay, just announced today they will also support Zapp at launch.
- The inclusion of Transport for London as a partner is a way to raise awareness and accelerate daily usage.
- Apple will benefit from a larger installed base of compatible devices (iPhone 6 and 6+) and from the awareness created by the media buzz from the US launch.
That said, it is still the very early days. Faster adoption in the UK does not mean Apple Pay will scale quickly. As we pointed out in a recent report, Apple Pay needs merchants more than merchants need Apple Pay. So Apple still has to demonstrate the added value it will bring to merchants (better experience, faster checkout, incremental revenues etc…) and brands.
Also, Apple needs to create trust among UK consumers. They managed to do so in the US and no doubt trust will increase with the backing of the main banks (except Barclays). However, for now, iOS users are more likely to trust banks, credit card networks, Amazon and PayPal than Apple to provide a mobile wallet solution.
Indeed, according to our Technographics data from Q1 2015, 27% of UK online consumers owning an iPhone would trust Apple to provide a mobile digital wallet but they are still more likely to trust PayPal (43%), a bank (41%), a credit card network (40%), and Amazon (32%).
It will be interesting to see how trust perception evolves among UK consumers after the launch next week and the growing awareness of the Apple Pay solution.