Apple CEO Tim Cook may not have had the year he was hoping for after saying that 2015 would be the year of Apple Pay, but it was a strong year for mobile contactless payments overall marked by increases in adoption and mobile payment volume, several more players entering the arena and multiple partnerships, acquisitions and commercial developments to foster the future of mobile payments. While it’s estimated that only 16.6 percent of U.S. consumers with a compatible iPhone have tried Apple Pay and this payment method is used in just 5.1 percent of transactions where it is supported by both parties, it was a catalyst for mobile contactless payments which doubled in volume for 2015 and are expected to triple in 2016.
According to eMarketer there were over 23 million proximity mobile payment users in 2015 that spent $8.71 billion, more than doubling from $3.7 billion spent via contactless POS mobile payment methods in 2014. The late 2014 Apple Pay launch gave mobile payments a shot in the arm, and while Apple Pay adoption may not be as high as many predicted, it was undoubtedly a force in driving the growth of NFC and other mobile contactless payment methods in 2015, not just through direct use of Apple Pay but also by encouraging more merchants to upgrade payment terminals that support Apple Pay and other mobile payment methods.
While Apple Pay adoption grew in 2015, it has been a slow process. PYMNTS has been tracking Apple Pay adoption since November 2014 when 9 percent of iPhone 6 (or 6s) users had ever tried Apple Pay, to 16.6 percent by October 2015, one year after launch. Apple Pay was well received with immediate use and adoption by many, but since that initial surge adoption has increased slowly, from 15.1 percent in March 2015 to the most recent measurement of 16.6 percent last October. Many that have used Apple Pay don’t use it often. Based on their post-transaction surveys PYMNTS estimates that in transactions where the customer and merchant are equipped and setup to use/support Apple Pay, it is only used for 5.1 percent of transactions. Consumers who had used Apple Pay in the past but not on that transaction were likely to say either that they didn’t know the merchant accepted Apple Pay or that they just forgot, each being reported by 30 percent of shoppers. Although it will be facing more competition, Apple Pay still has great growth potential as 35 percent of people who have ever used Apple Pay claim they try to use it every chance they get.
There was plenty going on in the mobile payments space outside of Apple Pay as well. Alphabet (Google) updated Google Wallet and launched Android Pay, while Samsung Pay launched in September with strong merchant acceptance thanks to their reliance on Magnetic Secure Transmission which does not require merchants to upgrade payment terminals. However, one cannot discount the significance of Apple Pay preceding this, considering that both of these mobile payment systems utilize the same type of tokenization as Apple Pay, and that card associations this year commercialized tokenization services to support any number of mobile wallets and eCommerce payment methods. These services, such a Visa Tokenization Services (VTS) and MasterCard Digital Enablement Services (MDES) can make it easier everyone to participate in the existing additional mobile wallets and digital payment services yet to come.
Of course it hasn’t all been a bed of roses for mobile contactless payments in 2015. Given the media buzz and marketing many would have expected higher adoption rate with Apple Pay, while some issuers experienced high rates of fraud and there were a couple other hiccups with Apple Pay along the way. Plans to expand Apple Pay came to fruition launching in Canada, Australia and the UK, but with fewer participating issuers. American Express is the only issuer supporting Apple Pay in Canada and Australia.
Although new mobile wallets like Chase Pay and LG Pay plan to launch in 2016, there was some consolidation this year, such as Google’s acquisition of Softcard. Meanwhile another mobile wallet, MCX’s CurrentC, has had a tough time taking off with multiple delays to full launch and changes in management. Now Walmart, one of its flagship partners, announced plans for a nationwide rollout of their own mobile wallet, which relies on QR codes, early this year.
2015 was a pivotal year for mobile payments with strong growth in volume and continued increases in both consumer and merchant adoption and support. 2016 is expected to bring continued growth for mobile payments at the point-of-sale with even more mobile wallets launching, and eMarketer expects the proximity mobile payment volume to triple exceeding $27 billion.
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