Google Wallet essentially failed with an NFC-based offline mobile payments system; what makes anyone think that Apple will succeed with Apple Pay? It’s also based on NFC technology. However there are some significant and subtle things that Apple has done that give Apple Pay a better chance of mainstream adoption.
At the highest level the twin benefits of convenience and security will appeal to many iPhone owners. In addition, Apple has enlisted numerous household brand names to participate in the program. The day one involvement of major retail brands gives the program additional credibility and offers “comfortable” and familiar places to test it out.
The fact that there’s already an active credit card on file with iTunes here is also a big deal. Apple Pay is ready to go “out of the box,” so to speak. Google struggled with payment card options for months. (In fairness, Google also faced carrier obstacles that Apple won’t.)
Beyond the iTunes credit card Apple has made it easy to add new payment or loyalty cards by simply taking a picture, using the iPhone’s camera. Those cards are then stored in Passbook, realizing its full promise as a true “mobile wallet.”
Apple has clearly thought through the overall user experience, emphasizing privacy and security in the keynote and on the website. These are consistently mentioned as concerns or obstacles in consumer surveys about mobile payments.
The behind-the-scenes mechanics of Apple Pay are too complicated for the average consumer to fully understand. Indeed they probably don’t really want to understand. They just want it to work and be secure. And if Apple can instill trust that Apple Pay is actually more private and safer than plastic people will use it.
The time may also be ripe for consumer openness for something like this, given all the news about hacking and retail security breaches (though Apple Pay won’t prevent any of that).
Apple’s Touch ID, which authorizes the payment, is another significant asset that Google didn’t have. It offers both convenience and security. People have been anticipating Touch ID as a payment trigger since the introduction of the iPhone 5S. It’s both an elegant way to pay and a useful symbol of security that makes Apple Pay a branded experience and gives it more “sex appeal.”
Smartly, Apple has also unified offline and online payments. It may in fact be the m-commerce dimension of Apple Pay that really helps it take off. To the extent developers incorporate Apple Pay into their apps, we could see a meaningful uptick in mobile commerce. The friction-removing simplicity of the in-app Apple Pay experience is what may get people hooked and give them confidence to try the offline, NFC experience.
Even if it takes awhile for offline payments to take hold, Apple will probably enjoy in-app mobile payment success in the near term. I would expect Apple developers to make Apple Pay a payment method in their apps almost without exception. That ubiquity will also help propel adoption and usage of the system.
Google didn’t offer a truly unified online and offline payment experience. The two haves were called “Google Wallet” but there wasn’t an element like Touch ID to tie them together.
PayPal and apps with stored credit cards (e.g., Groupon, Amazon, Uber) can already remove all or almost all the pain of entering information in tiny forms on a smartphone. However there really hasn’t been a broad, mainstream standard that developers and users could mutually rally around. Apple Pay may become that in the iPhone world.
I would expect e-commerce sites and mobile developers to incorporate multiple payment forms and options. If available, however, Apple Pay will probably win among iPhone users. That’s bad news for PayPal (and its subsidiary Braintree). Ironically Apple Pay is probably only good news for Google and will help educate and give consumers confidence in NFC offline payments, which will in turn probably give new life to Google Wallet.