Who Is Using Apple Pay?

Those who expect Apple Pay to transform the way we buy and sell might get sorely disappointed. The public is not accepting the product as quickly or as widely as some of the news stories claim.

Around 85% of the people who have access to Apple Pay have never used the app, a study by a company called Info Scout claims. Info Scout also discovered that only six percent of Apple iPhone 6 users had actually used the vaunted digital wallets. Those figures indicate that digital wallets may not be as widely accepted as some people have thought. What should also be troubling is that only around nine percent of iPhone 6 owners have even played around with Apple Pay but never used it.

So what is going on here? Why are people not using Apple Pay? My guess is that the hang up is psychological and cultural: people have long been conditioned to think of money as a piece of paper. The idea that money can also be digital is extremely hard for most people to accept.

The big challenge for Apple Inc. (NASDAQ: AAPL), PayPal, Square, and other providers of electronic payment solutions will be to get average people to accept their products. That will take a very long time, look how long it took to get average people to accept credit and debit cards. There are still many businesses that do not accept plastic.

The Biggest Names in Retail Still Not on the Apple Pay Bandwagon

Another problem is that lots of major retailers where real people shop every day still do not take Apple Pay. A sampling of the big name retailers that still do not accept Apple Pay includes:

• Walmart (NYSE: WMT) – America’s largest retailer.
• Kroger (NYSE: KR) – America’s largest grocer. Kroger’s subsidiaries include Harris Teter, Fred Meyer, Ralph’s, Smiths, QFC, King Soopers, Fry’s, and City Market.
• Costco Wholesale (NASDAQ: COST) – America’s favorite club store.
• Sam’s Club – America’s largest chain of club stores.
• Albertsons (note: the Apple Pay website claims it is coming soon).
• Target (NYSE: TGT).
• Home Depot (NYSE: HD).
• Lowe’s (NYSE: LOW).
• Burger King.
• Sears (NYSE: SHLD).
• JC Penney (NYSE: JCP).
• CVS Pharmacies.
• Kohl’s.
• Wendy’s.
• Seven Eleven.

Judging by its website, it looks as if banks are more likely to accept Apple Pay than stores are. One reason why Apple is having so much trouble is that the major retailers in the Merchant Customer Exchange (a consortium of retail giants), or MCX, do not want to touch Apple Pay until their alternative Current C is available.

Current C’s website is up and running but does not say when the payment app will actually be available. Actually, the website provides no real information whatsoever. The MCX website has a little more information on Current C but does not say when it is actually coming. Its blog has not been updated since December, and the most recent news update is from October. Interestingly, there is no mention of Current C testing at Target outlets in Minneapolis that had been reported late last year at the blog.

The MCX is in no hurry to bring out Current C, and it is easy to see why. There seems to be no real market demand for digital wallets in the USA. The most likely reason for this is the availability of other solutions with similar capabilities that already have widespread customer acceptance, such as credit, debit, and gift cards.

It looks as if the purveyors of digital wallets are going to have to do a lot of old fashioned marketing if they want to get the public to accept their products. That might give Current C an advantage in the digital wallet wars because some of the companies behind it, such as Kroger, are very good at marketing.

One gimmick Kroger will use to push Current C is to link it to loyalty card programs. That means they could reward people who use Current C with discounts on things like groceries and gasoline. Kroger’s fuel discount program is tremendous; last week I saved 40¢ a gallon with it. A similar promotion could help get working class people to use digital wallets.

Digital wallets are here, but it looks as if the American consumer is not yet ready for them.

Disclosure: Your friendly neighborhood blogger owns shares of Kroger and plans to keep them for a long, long time.