Phoenix Marketing International Reveals the Consumer Hurdles Ahead for Apple Pay

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Phoenix releases findings from a large-scale consumer survey on Apple Pay and currently marketed payment apps; Will Apple Pay succeed where others have fallen short?

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Despite industry efforts to communicate the security of NFC transactions, 40% of smartphone owners aren’t buying it

Casting a light on the short interval between the Post-Apple Pay announcement and the Pre-Apple Pay launch, Phoenix Marketing International releases findings from a large-scale consumer survey on Apple Pay and currently marketed payment apps. About 2,700 smartphone owners were interviewed online as part of total sample of over 4,000 household financial decision makers that provided insights on the consumer payments market in general. More detail can be found here.

The survey quantified a huge reservoir of untapped usage potential for payment apps. There are currently some 9-million smartphone households that have used a smartphone payment app – but there’s an additional 8-million households that already have an app ready to use on their phone and don’t use it. Converting installation to usage would increase the user base by nearly 50%. Why the gap? What can Apple Pay and other app providers do to harness this hidden potential?

  •     Hurdle #1 links back to NFC itself. NFC credit or debit cards have a 13% penetration rate overall but a 48% rate among those who have used a smartphone payment app. NFC card users have largely driven the early adoption of NFC apps. “Despite industry efforts to communicate the security of NFC transactions, 40% of smartphone owners aren’t buying it”, said Greg Weed at Phoenix Marketing International. “This group thinks ‘tap and go’ is a barrier, not an inducement, to app trial. By a two-one margin, consumers give lower security ratings to an NFC transaction than a magnetic strip card transaction.

In this context, Apple Pay’s big coup was to focus on security and privacy as the consumer end-benefit itself by adding fingerprint, chip (secure element) and most, importantly, the benefits of tokenization. “Of all transaction types measured for consumer perception of security, the tokenized transaction benefit was rated the ‘most secure’. Apple has a positioning leg-up here but NFC concerns may still retard adoption for some.

  •     Hurdle #2 focuses on field execution. Non-app users with ready-to-use apps variously reported ease of set-up, merchant acceptance and customer support issues posing as barriers to use. Among users, 38% reported transaction problems at the point-of-sale. 64% of those with an installed app who haven’t used it have contacted customer service or technical support and a quarter of this group came away from the call still not knowing what to do.

“This presents an executional opportunity for Apple Pay and points to the need for improvement in how current app providers make themselves accessible and helpful to consumers,” added Mr. Weed. “Given the difficulty of finding the right phone number at the right time, it would make be logical for app providers to feature the technical support service number – or a chat number --right in the app itself. In the case of Apple Pay, the ease of set-up with Passbook and iTunes should not be taken for granted because the current research showed that 38% of iPhone users don’t have a payment method linked to an iTunes account and 71% don’t use Passbook.

  •     Hurdle #3 is Apple Pay’s strong stand on payment privacy at the expense of personalized retailer rewards. Apple made this move intentionally and it will likely earn the brand a large foothold in the payment app market. This positioning will hit home for many. As a result of security breaches, 51% of smartphone owners have become more worried about how much of their personal information is in the hands of merchants; and 39% have become less comfortable receiving personalized suggestions based on their past purchases. Yet, when push comes to shove, consumers love a deal: 37% of smartphone owners prefer a shopping-only app that provides rewards and improves the shopping experience. An additional 39% prefer a shopping app combined with a payment function and 23% are happy with a payments-only app. “This trade-off is certainly not lost on Apple, given their iBeacon technology, but it’s an issue Apple will need to work through in order to maximize Apple Pay’s market presence over the long term” Mr. Weed.

With the sales of iPhone6, the distribution of the Apple Pay app dwarfs the installed base of competitive apps. As Apple Pay goes live, the importance of executing the launch to maximize actual usage is the new priority.

The Phoenix report, ‘Apple Pay and the New Environment for Mobile Payment Apps' is part of an ongoing research study, Consumer Payments Monitor. For more information, please contact:

Mark Sutin
Greg Weed

About Phoenix Marketing International
Phoenix Marketing International is a premier global marketing services firm providing its clients with tailored, unique insight into their customers and markets via a wealth of existing proprietary data. Coupled with custom research products and the latest qualitative and quantitative techniques, Phoenix has extensive research experience across the Automotive, Financial Services, Healthcare, Converged Technology and Media, Restaurant, and Travel/Leisure sectors. From the strategic definition of consumer needs to effective marketing program implementation, PMI provides profit-driven market solutions and is committed to maximizing a client’s Return on Marketing Investment (ROMI) by leveraging the ability to attract and retain new business through cost efficient data acquisition and statistical modeling techniques. Founded in 1999 by Chairman and CEO, Allen R. DeCotiis and President, Martha Rea, Phoenix Marketing International has established its global presence with offices in major locations such as New York, New Jersey, Boston, Philadelphia, Raleigh/Durham, Detroit, and London.

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Kristin Johnson
Phoenix Marketing International
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