http://www.wsj.com/articles/inroads-made-by-apple-pay-propel-mobile-wallet-idea-1422231681
Inroads Made by Apple Pay Propel 'Mobile Wallet' Idea
ENLARGE A customer makes a purchase using Apple Pay, which so far is limited to the U.S. Photo: Invision/Associated Press
Apple Inc. 's payments service, now three months old, is making progress toward a goal that has eluded other mobile wallets: persuading people to use it.
Previous efforts by Google Inc., eBay Inc. and a host of startups to prod shoppers to pay for purchases with a mobile phone have languished, because consumers didn't see an advantage over swiping a credit or debit card.
Early signs suggest that Apple Pay is different.
"Our customers are saying it's safer," said Brittany Salcedo, night manager at Canyon Market in Springdale, Utah, near Zion National Park. The supermarket installed the wireless readers that work with Apple Pay three weeks ago. Though Ms. Salcedo hasn't kept a formal tally, she estimates that 30% of the store's shoppers are using the service.
The machines also accept Softcard, a competing mobile-payments service owned by a group of U.S. wireless carriers, but Ms. Salcedo estimates that five times as many customers use Apple Pay as Softcard.
Finance-industry veterans attribute Apple Pay's momentum to the popularity of Apple's consumer gadgets, a massive marketing push from banks and credit-card issuers, and security concerns following high-profile data breaches at retailers like Target Corp. and Home Depot Inc. that exposed customers' debit- and credit-card information.
Instead of swiping a card and signing a receipt, shoppers using Apple Pay wave an iPhone (or, soon, an Apple Watch) in front of a wireless reader and complete the transaction with a fingerprint.
Authorization relies on a one-time code; merchants don't have to see a card number, reducing the chance of theft.
McDonald's Corp. and drugstore operator Walgreens Boots Alliance Inc., two early adopters of Apple Pay, said last month that twice as many shoppers are paying through wireless readers since Apple Pay arrived. Neither company would disclose how many of those transactions use Apple Pay versus other payment services.
Harbortouch Payments LLC, an Allentown, Pa., supplier of point-of-sale systems, said it has witnessed a similar surge in interest among its clients. Harbortouch has offered free wireless readers to them since 2012. As of August 2013 , 22% of its merchants had installed readers. In the month after Apple Pay was announced, 68% of orders asked for the readers.
"It's like night and day," said Brendan Lauber, Harbortouch's chief technology officer. "Now, merchants are actively coming to us and asking how to support this."
"This is a long-term tipping point for mobile payments," said Jim McCarthy, global head of innovation and strategic partnerships at Visa Inc. He said Apple Pay will be the "reference model" for future mobile-payments services.
In another sign of Apple Pay's impact, Google is in advanced talks to acquire Softcard, the competing mobile-payments service, according to people familiar with the matter, the Journal has reported.
Google declined to comment.
Apple says more than 220,000 locations accept Apple Pay, and that card issuers responsible for 90% of credit-card spending support the service. But there has been little data available to indicate how widely the service is being used. The company, which launched it Oct. 20, may offer some details Tuesday, when it reports financial results for the period ended Dec. 27.
Still, the trend appears to be positive. "I've never seen a bigger adoption of an alternative-payment system," said Brian Roemmele, a payments consultant and researcher with 30 years of experience in the industry. He pointed to Bank of America Corp. 's disclosure earlier this month that nearly 800,000 customers signed up for Apple Pay in the fourth quarter.
Mr. Roemmele says Apple Pay isn't "too disruptive" for banks and credit-card companies, which have to link a user's credit card to his mobile phone. Afraid of being left behind, banks agreed to pay Apple a 0.15% cut on every transaction, according to people familiar with the matter. An Apple spokeswoman declined to comment.
App developers also like the system because it simplifies the checkout process, reducing the chance that a shopper will abandon a purchase. Merchbar, which sells music-themed goods like Ozzy Osbourne water bottles and Foo Fighters T-shirts, said 20% of purchases in the past month were made through Apple Pay. The service reduced the average checkout time to 17 seconds, from 103 seconds.
So far, Apple Pay is limited to the U.S. and works only on the latest iPhones and iPads. Just a small percentage of retailers have the necessary readers, and a consortium of retailers, including Wal-Mart Stores Inc. and Lowe's Cos., plans to introduce its own mobile-payment service later this year.
Meanwhile, banks and credit-card companies are helping to promote Apple Pay, as evidenced by a barrage of commercials from Bank of America, Visa, MasterCard Inc. and Wells Fargo & Co. Randall Vogsland, a 37-year-old technology consultant in Minneapolis, said he uses Apple Pay several times a week to pay for sandwiches at Subway or buy things at Walgreens. He doesn't like carrying a bulky wallet, and he likes Apple Pay's security.
The service isn't flawless, though. Store-branded cards generally don't work with Apple Pay, so Mr. Vogsland can't use his Macy's Inc. credit card, even though Macy's accepts Apple Pay. The service also doesn't work with corporate credit cards or certain co-branded cards tied to loyalty programs.
"I don't use it just because it's new, I use it because it's convenient for me," said Mr. Vogsland.
Write to Daisuke Wakabayashi at Daisuke.Wakabayashi@wsj.com
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