Rapid Fire Thoughts On Apple Pay

As you may have heard, Apple launched an evolutionary mobile payments product called Apple Pay this week. Here are a few quick thoughts on the product, launch and mobile payments market in general.

Functionality today: Apple Pay is a payments product today, pure and simple. No loyalty, no coupons, no fancy features. Just an easier and more delightful way to pay. Load your credit or debit card onto your phone and start paying. Evolution, not revolution. Win.

Future functionality: I’m not going to guess at how Apple plans to sequence additional Apple Pay functionality. I now trust that they know what they’re doing in payments. Based on other less-than-stellar software launches like Siri and Maps, I didn’t know what to expect on the payments front. But they’ve introduced a fantastic payments product, and I’m excited to see what comes next.

Activation: The process of adding a card to Apple Pay is smooth — very, very smooth. Adding a card using the iPhone camera is easy, intuitive and feels magical. This was exceptional work by Apple.

Transaction notifications: I use American Express primarily, and the transaction notifications for both Apple Pay and general transactions are absolutely fantastic. They are instantaneous and clean with a simple push notification. The last transaction always shows inside of Passbook under the card that was used, which is a very nice feature.

Passbook: I am unclear on why Apple Pay doesn’t have a dedicated app. It is odd that Apple would bury the heavily marketed Apple Pay functionality inside of the Passbook app that most people seem unfamiliar with. Passbook is not intuitive to use, given that merchants present Passes in inconsistent ways. Even the merchants with solid Passbook implementations such as Starbucks tend to bury the functionality deep within their apps. I assume that this is because they prefer customers to visit and transact through merchant specific apps. Apple Pay as a standalone app makes a lot more sense to me.

Marketing: Apple Pay marketing has been out of this world. Ever since the underwhelming September Apple keynote presentation introducing Apple Pay, the marketing has been phenomenal. Apple, their financial partners and their merchant partners have used every conceivable channel to create awareness, buzz and desire for mobile payments. I’ve seen television ads from MasterCard, merchant in-store digital marketing at Duane Reade, e-mails from my credit card issuers and online marketing galore. The marketing has been simple and straightforward.

Security: Apple Pay is more secure than plastic credit and debit cards. Any merchant who chooses not to accept Apple Pay is taking a serious risk at this point. I would not want to be the retail executive who explains to my iPhone carrying customers why I forced them to swipe a credit card at my store in December 2014 and then had my security systems breached. Based on recent history, this scenario is likely to play out, and it will be very ugly.

On-device commerce: Apple Pay in app payments are magical. As someone who has studied transaction flows, worked on many mobile payments products and considered virtually any payment interaction you can imagine, the ease and simplicity of using Touch ID to complete an on-device transaction brings an automatic smile to my face. The well documented gap between commerce revenue on iOS vs Android is about to widen significantly.

Retailers: You’re starting to see who the creative, curious, bold physical and e/m-commerce retailers are by who supports Apple Pay and other mobile payments, loyalty and coupon schemes. I am long retailers who embrace new technology through pilots and tests and then double down where they are seeing success. I am short retailers who repeat the mistakes of other industries such as music, clinging to outdated technology and customer engagement models that are proving to be broken. These retailers will eat sand while their competitors smoothly ride a beautifully cresting technology wave.

Financial institutions: If you’re wondering who the big winners are in the Apple Pay scheme, look no further than your latest issuing bank e-mail, card network website or TV ads during the weekend sports games. Card issuers and networks are literally blanketing the airwaves to market their participation in Apple Pay. Apple has embraced their tokenization and security scheme, preserved the traditional payment routing paradigm and increased the likelihood that the status quo, high interchange model stays in place.

MCX/CurrentC: MCX has been in the works for years with little to no visible progress. MCX retailers rushed out a “coming soon” press release ahead of Apple Pay. It didn’t say much. The CurrentC terms of service are not customer-friendly, eg the customer is liable for fraudulent activity. CurrentC is going to be very expensive to roll out, and the marketing + customer acquisition costs have a good chance of wiping out any payments cost savings. We’ll know more if & when CurrentC launches, but right now it seems to be a treasury vs marketing led product. Looking at how Apple Pay launched, it is pretty clear that a marketing-led approach to introducing a new mobile payments product is more advisable than a treasury-led approach.

Google Wallet: Not much news on the Google Wallet front in the past few years other than Google’s recent PR stating, “hey, Apple Pay looks a lot like the product we launched in 2011”. Which is true in some respects but untrue in a few critical respects — Apple Pay has all the issuers & networks on board meaning all cards available at launch, Apple Pay doesn’t include a proxy transaction structure that obfuscates the actual card type from the merchant and Apple Pay is available on all mobile networks. Apple Pay has the advantage of better availability and simplicity as well as the advantage of better timing (late 2014 launch in advance of 2015 merchant hardware upgrades due to EMV requirements). That being said, Google Wallet is still very real, both on device and in the real world, and it will benefit from increased consumer awareness of mobile payments. Right now, Google Wallet looks to me to be the only credible in-store payments alternative to Apple Pay in the US.

Those are a few rapid fire thoughts on Apple Pay and mobile payments based on a few days of usage and a whole lot of observation and reading. I plan to revisit soon after using Apple Pay some more and hearing folks’ response to my thoughts. And I can’t wait to discuss Apple Pay and mobile payments some more at Money 2020. Please shoot me a note or tweet if you’d like to meet and discuss!


Comments (



  1. Dale Buckey

    Thanks for the concise update. I wonder what the MCX merchants were “promised” to stop new terminals from accepting ApplePay?


    Mike, well put. With regards to issuers, my thoughts are a little less bullish for these guys. Understand re: the near-term preservation of the interchange model, but I really think there are longer-term implications as Apple Pay rolls out: private label cards, pay with points or competing Rewards programs, integrated banking/ ACH? Perhaps store of value in Passbook?

  3. WaltFrench

    Nice summary.

    Unmentioned, and I think worth analyzing, is that SOME retailers really put all their chips on the whole loyalty/promotion strategy. A typical CVS receipt, for example might have feet worth of coupons, tied to your shopping behavior, targeted at getting you back in the store, where you’re expected to buy snow shovels, Cheerios or other front-of-the-store, high-margin items.

    Those coupons work best if they get you to buy Stuff that’s somewhat appealing — “Value-sized” versions of a product like fish oil that you apparently are buying competitively from CVS and others, for instance — without cutting into the profit margins overall.

    The mystery to me is why CurrentC doesn’t use iBeacons to fire up a store app, then ApplePay within it, to make ApplePay both secure AND convenient for customers, without giving up the precious user info. Can’t be that much work, and if you want the high-volume customers, they’re the ones most likely to justify the effort and clutter of a free app.

    1. mikedudas

      Walt — spot on comment, and given that I’m working on mobile commerce loyalty at Button, I should have put a section in there to address this. I’ll plan to follow up with a separate post on loyalty & mobile commerce.

  4. Retailers Banning Apple Pay Are Taking a Big Security Risk | Re/code

    […] So whatever their reasons to ban Apple Pay, MCX retailers like CVS and Rite Aid are choosing to ban a payment method that is more secure than what is currently the default non-cash method. As entrepreneur and payments buff Mike Dudas said in a smart blog post this weekend: […]

  5. Joshua Lee

    Great post….Also missing, in regards to CurrentC, is that it’s a “win” for the retailer but has no benefit to the consumer. Consumer’s like their credit cards (be it for the points towards airfare, gas, etc) and I for one don’t want to be forced to pay with debit. If I only wanted to pay with debit, I wouldn’t own credit cards. Do I think CVS/Rite Aid’s decision will cause me to switch solely to Walgreen’s, probably not….but it makes clear their “bottom line” mentality that does offend me as a consumer.

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