Contact Less

In September 2016 Apple Pay came to support the world’s largest public transit system. It happened through the integration with Japan’s FeliCa and gave Apple Pay access to 160 million daily transactions.

This, along with many other milestones don’t get a lot of attention. Apple Pay is in what could be considered an attritional competition with non-consumption. There are no decisive battles won or lost, only the relentless pressure to make progress against a reluctance to change.

Before I go on, I should make the attrition/decisive type of conflict clear. The terms come from military science. A war of attrition is one where two sides essentially grind against each other and the winner is the one which lasts longest. A decisive battle is one where a conflict is won through a single, acute encounter where, due to either demoralizing or circumstance reasons, one side gives up. It’s the knock-out punch vs. the fight to exhaustion.

When applying this dichotomy to competition, we need to be careful about who we define as competitors. Note that I said that Apple Pay is in a fight with non-consumption. It’s tempting to say Apple Pay competes with some other payment system like Samsung Pay or Google Pay. But none of these alternatives are as powerful as the existing mix of contact payment systems: cash, credit card magnetic swiping and some other hybrid of codes and user experiences (especially online.)

When seen this way the challenger must compete through persistence. It’s impossible for Apple Pay to decisively defeat non-consumption in one battle. It takes literally millions of decisions for adoption: each consumer, each merchant, each bank, each point of sale. It’s a relentless grind of pitching, selling, demonstrating and shaming into action.

It’s been three years of this type of competition and progress may seem hard to spot. That is because we don’t see the big wins. We can only see small wins. The win in Japan, as significant as it might be (160 million daily transactions added to the addressable market) is still small compared to all transactions world-wide.

Merchants tell Apple that 90% of contactless transactions in the US were Apple Pay. Apple sees continuous growth and cited 500% grown y/y in payments last quarter. The total amounts to hundreds of millions of transactions worth billions of dollars.

Anecdotally, the points-of-sale supporting the system are growing. 76% of the top US merchants have agreed to deploy by end of this year.[1]

But the total market is probably measured in billions of transactions and trillions of dollars. There is a lot to go.

On the bank side, the US wins came quickly and thoroughly. 3500 US banks support Apple Pay through their issued credit cards. Globally the figures are unstated with some countries absent completely and others engaging quickly. Australia lags while the UK is mostly on-board.

The point of sale terminals are also largely not an obstacle with the current generations almost all being able to process contactless transactions. The amazing thing about this business is just how many sides there are to this market: merchants, users, Apple, banks, POS terminals, credit card companies, online payment systems, etc.

To see progress at all is surprising. Changing payment systems is extremely complicated due to the breadth and depth of infrastructure. There are already 5 million contactless acceptors in the US. But there are many more points of sale[2] There is a long tail distribution for these systems so saturation will take a very long time.

Apple Pay is however only the first battle. Beside credit cards and cash, inside your wallet are more items that need to move into your devices: access cards, passports, driver’s licenses, IDs.

One unsung hero has been the device-based boarding pass. Security and gate agents don’t touch your phone so when you are invited to place the phone on the scanner at security or boarding, there is a sense of tangible and visible progress.  It was a rare sight a few years ago but I see it more and more each day I fly. The paper-less boarding pass has crossed the chasm into mainstream. Cash, plastic cards and IDs will also be deprecated. All it takes is persistence and time.

We all crave decisive battles and can’t stay tuned for the attritional outcomes. Nonetheless that is how most conflicts end up. This is the sort of conflict where a superpower wins and an asymmetric challenger falters. It’s resources and processes rather than enthusiasm that matter most.


  1. Note that that does not mean 76% of all points of sale will have it but rather the commitment at the top is there. []
  2. How many exactly is actually hard to determine. []
  • berult

    If it ain’t broken, fix it…!

    Apple Pay, as derived from an all encompassing mission statement, competes against the accelerating erosion, and pas-de-deux decoupling of the privacy/security frame of human reference. Right-and-left.

    It talks of human-value consolidation, in a world in the process of being deconstructed. For it ought to be voided with a human ninety-five percent dark-matter/dark-energy component, in a sort of seamless parody of the Universe itself. Cutting-edge is setting the paranoïa/determinism agenda, and it’s not meant to end well for the unpredictable cognoscenti.

    The privacy/security evolutionary accelerant is being atomized to a neutered ‘cogito, ergo sum’. It’s being randomized to a perfectible state of human, and humane entropy.

    Can widely diffused Apple Pay ultimately stay faithful to Apple’s mission statement? Will an o-sum game be playing out in the ‘land of plenty’, between the i, and the u…? If…’so be it’, I pick the dark horse nebula, mind me… berult.

    • hannahjs

      I am having trouble understanding you, are you James Joyce or Thomas Pynchon? Or do you specialise in postmodern deconstructionism? Maybe it’s cyberpunk poetry, yeah I get that, cool.

      • berult

        The author of this Blog and I have been getting from each other, over the years, what we both richly deserve…

        Ordered randomness, graphic filigrane, and vagabond poetry. I’m just glad you’re in on it. berult.

      • Pointebasic

        hannahhj, I think berult’s post is considered ‘textual masturbation’ ;v)

  • danieleran

    Apple Pay acceptance by sellers is one battle, and use by customers is another.

    Google began paying to roll out NFC years before Apple Pay appeared, even though many terminals remained unusable. The “upgrade” to chip cards also helped by typically also adding NFC capability. Since Apple Pay, there’s been a new surge in vending machines and other deployments.

    As a user, I’ve found that chip cards–which are now often required–were rolled out so poorly in the US that it is easier and faster for me to use Apple Pay. With certain cards (my AmEx), I also don’t have to sign when using Apple Pay, unlike when I used my card (this is inconsistent, related to the mess of equipment configs out there).

    Paying by iPhone or Watch is more convenient than pulling out a specific card in part because its a one handed transaction. Using my wallet requires two hands. As Watches become more common (I’d expect Apple to release a lower cost band for kids soon, which could allow them to make purchases and for parents to track where they are), I think the convenience of Apple Pay will grow rapidly.

    • 程肯

      “I’d expect Apple to release a lower cost band for kids soon”
      Haha, only if the parents can put a dollar cap on what they buy! Or, if the parent can setup a “accept or decline” with little delay.

      • handleym

        That “accept or decline” with little delay is an interesting idea.
        TECHNICALLY I think it is feasible today. I have my (Chase Visa) card set up to SMS me after EVERY transaction on my card, and those SMS’s appear like a second after the transaction goes through at the machine.

        But as far as UI and customer flow go, you have the problem of the checkout machine/spot being locked up for some arbitrary period of time while the parent takes as long as they take (which could be who knows how long) to respond to such a notification/request. (And this delay doesn’t even imply negligence — if parent is driving, you WANT them to be ignoring notifications…)

        A better alternative might be one that operates not on precise go/no-go rules enforced by the credit card company, but which jut allows for better parent-child communication. Things like the child has pre-validated with the parent before getting to the checkout, something like “child requests option to spend up to $30” and parent can validate that, with the validation lasting for the next 8 hrs or whatever.
        Perhaps with a UI that makes it very easy to photograph what is being purchased so that photo is sent to the parent as part of the validation request?

        In principle WTF can’t retailers just send an e-receipt to some designated drop point (eg my “Apple Pay account database”) for EVERY electronic transaction, so that attached to every transaction there is a full receipt, rather than the current ridiculous summary of just the dollar amount and a (sometimes meaningless) vendor name?

        While we probably won’t get that until some national government demands it by law, a parent could at least make it clear to their child that the deal is use of credit card is conditional on the child scanning (ie photographing) the receipt after each purchase, and again the UI could substantially facilitate that. Hell, I (child-less, but always wanting better records) would find that a useful facility if Apple Pay made it a trivial part of the UI, to capture photos/scan documents at all transactions, and maintain the data in a nice list recording location+time.

      • 程肯

        All true and some good ideas. Interestingly, I often photograph receipts for tax purposes.

      • As a parent I agree with you. Fortunately, Apple already provides us with extensive control over these matters. If a “kid’s Watch” is released, I’d image control over Apple Pay will be no different:

  • 程肯

    So happy to get rid of wallet, and put credit cards and ID in a cardslot behind my iPhone. Even more happy to use iPhone or watch for ApplePay. Will be happier when everyone takes ApplePay and IDs can be on my iPhone like plane tix. I use the Vallet app, as backup now. I’ve even considered removing the chip in my car key and putting it in my cardslot on iPhone case, so I don’t have to carry a car key. Front door has a keypad, so keyless and walletless would be the goal.

  • Horace, what about Apple pay as in-app payment? very little is said about it. It s more described as an offline payment when Apple has offered it to app retailers to enhance in app payment. Is there as much friction there? it seems more than for iPhone based Apple pay, Apple has difficulty convincing iphone 5s+ users to convert to Apple pay?

  • Jared Porter

    I think the intrinsic security superiority of using Apple Pay is lost on many consumers these days as many don’t realize using it greatly mitigates the “man in the middle” type of fraud potential. (I always especially wince when I have to order something online from some vendor that requires ALL of my personal credentials to be submitted online.)

    Time for Apple and Banks to advertise their single-code-security-superiority again as the public is generally confused as to whether or not Apple Pay is “safe” to use.

    Also adoption could be sped up if Apple would get Starbucks to facilitate purchases off of their Starbuck’s card to be conducted in one, combined scan. (People in the back of the line would start noticing more and more customers speeding up the line by paying with her Watch. Starbucks is slow to allow full Apple Pay because it might reduce the FLOAT it enjoys on customers’ cash balances held on its cards.)

  • Rodrigo Fernandes

    Maybe one of the situations when there is a ‘decisive battle’ is when the new entrant is a price based new-market disruptor. Example: someone creates a $1,000 car — consumers just buy it, there is no education and no ecosystem envolved.

    In the other side, a ‘war of attrition’ would be situations where the consumer may need to be educated and lots of interdependecies exist.

    • handleym

      You’re asserting consumer behavior (how people would respond to a $1000 car) based on pure theory. Apart from the practical aspects of this (how would this goal be achieved?) you’re making some massive assumptions about what the purposes are of buying a car, and what the tradeoffs are that people might be willing to make for that cheaper car. These assumptions (your theory) are likely VERY VERY VERY wrong.

      There’s nothing more dangerous than an assertion about human nature that’s based on broken theory rather than on history, empirics, and other richer data sources.

      “The Tata Nano was rolled out at $2000, slightly more expensive than the traditional two-wheelers, and positioned as ‘the world’s cheapest car’. Despite the Nano’s undeniable functional and economic benefits, its launch was deemed a failure because of low sales. According to Chakravarti and Thomas, Tata’s main mistake was to underestimate consumers’ symbolic needs, focusing on price at the expense of the sense of pride that low-income consumers experience when buying a car.”

  • handleym

    All of which would be a lot more convincing if APPLE could get its act together regarding Apple Pay…
    It is DEFINITELY the case that iTunes uses a separate (non-Apple-Pay) based payments system. As far as I can tell it is also the case that the online Apple Store uses a THIRD payments system. Meaning that when your credit card expires, you have three places where you have to update your credit card info. And this is within Apple!

    So what does this tell us?
    – There are parts of Apple (like everything related to iTunes, and the payments part of the online Apple store) that are massively incompetent and uninterested in doing things right?
    – That Apple has done a lousy job of making it easy to “move” to Apple Pay?
    – That “moving” is hard — meaning it takes years, and we should in the nearish future expect a substantial transition of businesses after they all have put in the 10,000 hours necessary to make the transition?

    I honestly don’t know. But I do know that Apple is doing itself no PR favors when, every damn day, the exact same device that is ready and armed for Apple Pay is whining to me that it can’t download (free) apps from the iPhones app store because my credit card info has expired…

    • pk_de_cville

      Tell us what you really believe.

      WFT? CC info expired? Why doesn’t this work?

    • Peter

      Maybe iTunes has an “expired” problem but Apple Pay certainly does not. AP data is updated automatically.

  • Kanjo

    Great post! There was an interesting Apple Pay Japan comment from Tim Cook in the Q2 conference call last week. You might be interested in the analysis of that from Japanese IT journalist Junya Suzuki, I posted an explanation of it in English:

  • Peter

    I spent three weeks in Britain recently and it seems that Apple Pay is accepted almost everywhere. Major stores, corner stores, restaurants, pubs. Way more acceptance than in the US.

    And the listing of the limit (was ~ £20) has helped too. One store clerk was mighty surprised to have no “signature receipt” needed for a £100 purchase.

  • Point of sale acceptance remains the issue for me as a May/June 2015 Apple Watch buyer. I do most of my transactions in and around Boulder County (Colorado), and we still have relatively few Apple Pay-ready terminals.

    I mention my location because we’re not exactly in the boonies. It’s only when I travel to larger/denser cities that Apple Pay becomes more readily available.

    This will change in time, as Horace correctly suggests, but the meantime can be frustrating given the convenience Apple Pay promises the user. However, having sold merchant bank services right out of college, I can attest to the convoluted nature of this business at the merchant level. Things are terrifically complicated and they tend to move achingly slowly…until they don’t.