The Industry

How Apple Plans to Win the Mobile Payment War

The mobile payments space is hugely profitable. Can Apple become the go-to option?

Apple Pay at the top of the hill of the mobile pay war.
Illustration by Slate. Image by Bolkins/iStock.

There’s a reason everyone seems to be getting into mobile payments. Thanks to increasing smartphone usage and a push for faster, simpler, more secure financial transactions, mobile payments could become a $3.4 trillion industry by 2022. In the U.S. last year, eMarketer estimated it to be a $49 billion market already.

The consumer options are sundry: There’s Apple Pay, Samsung Pay, and Google Pay; PayPal, Venmo, Square, and Square Cash; bank-backed alternatives like Zelle and Chase Pay; and in-app options through things like WhatsApp or Facebook Messenger. As consumers abandon cash, checks, and even credit cards, everyone is jumping into mobile payments—but perhaps none with the zeal of Apple.

First introduced in October 2014, Apple Pay has become one of the leading digital payment services for U.S. consumers, but it doesn’t yet dominate the global market. Chinese competitors WeChat Pay and Alipay have a combined 1 billion users, followed by PayPal with 210 million users and Apple with 87 million, as of August 2017. Apple is aggressively working to close that gap using a number of different tactics, and it’s working—kind of.

To start, Apple has worked on expanding its base by improving its compatibility with local financial institutions and credit cards so that the service is available to more iOS users. Every few weeks, Apple has extended Apple Pay to new banks and credit unions, and now more than 2,700 institutions support the service. It’s also been expanding to new countries, most recently Norway and Poland. And it has expanded beyond retail purchases to peer-to-peer payments, largely the domain of Venmo. Apple introduced Apple Pay Cash in December. To facilitate adoption, Apple Pay Cash is built directly into the Messages app, making it a more convenient, built-in payment option for iOS users to turn to when haggling bill details via text with friends.

Apple also has a powerful, if not annoying, tool it’s been using to woo iPhone owners onto its payment platform: a barrage of incessant, unceasing notifications.

“I just updated my iPhone 6 Plus to, and … I am periodically getting a notification from the Wallet App to add a credit card,” one Apple forum user wrote in 2016. “I have never and will never use Apple Pay. I don’t care how secure it may be, or how convenient it may be I have no desire to use that feature and I am getting tired of seeing the notification pop up five times a day.”

“Thanks, but no thanks. I’ve reset my phone, turned off notifications, and yet, I still get the prompt… over, and over again,” another user said regarding the “annoying” notification “Complete your set up, by adding Apple Pay” after iOS 11 debuted in late 2017.

After Apple Pay Cash debuted, the persistent pop-up notification within Apple’s Messages app prompted one iOS user to assume his phone had succumbed to malware.

While Apple’s insistence that your phone isn’t fully setup until you’ve added a card to Apple Pay may be infuriating to some, its tactics seem to be working. Apple Pay has seen impressive year-over-year upticks, with an estimated 127 million users as of the first quarter of this year.

Apple has good reason to be so aggressive with its user acquisition tactics: It has other competitors coming for it. Unlike other major retailers like Walgreens, Best Buy, and Target, Walmart has refused to adopt Apple’s mobile payment platform in its stores in favor of its own. Like Chinese mobile payment apps, its option, Walmart Pay, uses an on-screen QR code that gets scanned to complete mobile transactions. Apple’s method relies on near-field communication technology built into a phone or watch, which can be a barrier to entry for older phone owners. Walmart Pay debuted in December 2015, and it could overtake Apple Pay in terms of active users before the end of the year. And Walmart is not Apple’s only new rival: The Starbucks app also appears to have a higher number of active users than Apple Pay—and you can use Apple Pay at Starbucks.

Apple clearly has a long way to go. Recent estimates suggest that only 16 percent of iPhone owners are also Apple Pay users—perhaps part of the reason Apple has gotten more aggressive with its Apple Pay notifications since the debut of Apple Pay Cash. By the end of last year, Apple Pay accounted for 90 percent of NFC-based mobile transactions worldwide. Compared with other NFC-based platforms, Apple is crushing it. But if the company truly wants Apple Pay and Apple Pay Cash to be our go-to payment methods both at retailers and amongst friends, it’s going to have to do more than just bully us into forfeiting our bank information. It’s going to need to convince users that Apple Pay is faster and more convenient than pulling out a credit card—and push retailers to do the same. It might be a tall order. Chinese citizens have been far more receptive to ditching their physical wallets for their phones than U.S. buyers. But Apple succeeded in making smartphones an indelible part of our daily lives. It’s in a position to do that for payments, too.