Payment declined

Monday 20 October 2014 by Drew Heatley

Old fashioned cash register

Paying for goods with your smartphone is nothing new. It’s been around in various guises for the best part of a decade, starting with QR codes, while Starbucks has been a pioneer in recent years. That’s not stopping the apparent majority of news outlets heralding the launch of Apple’s contactless payment service Apple Pay as the moment mobile payments hit the mainstream.

But in its home market of the US, mass adoption is far from certain – in fact, I think it’s unlikely.

Apple has the credit and debit card details of more than 800 million consumers thanks to iTunes, but that’s not enough to guarantee success. There are a number of factors at play. First and foremost, consumers like choice. They don’t want to be tied down to a single brand, no matter how strong it is. Holistic services are an attractive prospect, but they take choice away. Consumers want to be able to select the best of everything and pick their own vendors, partners and service providers.

Apple pay


Security remains the biggest barrier to mobile payment adoption. And following the recent iCloud scandal, Apple’s reputation for securing consumer data has taken a battering. But the biggest concern is that no company is safe from data breaches. Target was hit last year in a debacle that ultimately cost CEO Gregg Steinhafel his job, and Home Depot suffered an even larger security scare in September. These are companies with really robust, secure IT systems – they didn’t do a poor job, but it just wasn’t good enough. Is Apple Pay un-hackable? As good as the technology might be, I worry.

Chicken and egg

Apple Pay will trigger a wave of “early adopter” users and merchants, but will it revolutionise retail? I don’t think so. It’s expensive for retailers to embrace contactless technology. Infrastructure is a huge hurdle – US bricks and mortar commerce simply isn’t set up for mobile payments. Apple Pay may have the support of more than 500 US banks at launch, but that doesn’t change the fact that many of the country’s largest retailers still run very old point-of-sale (POS) systems. Contactless payment – including using a smartphone – is a long way off for those merchants.

The last large-scale innovation in payments was the introduction of “chip and PIN” a decade ago – and it still hasn’t arrived in America. The payment mechanism includes a chip inside the credit or debit card that requires the consumer to enter a four-digit personal identification number (PIN) instead of providing a signature. It’s set to finally arrive in the US by the end of next year, but the delay just highlights the issues facing Apply Pay – retailers just don’t have the kit.

A chip and pin terminal

It’s a chicken and egg situation. Merchants won’t invest in expensive technology unless there’s a large enough user base, but that base can’t grow if the payment solution isn’t accepted anywhere.

Existing players

Apple arrives as a small fish in a huge pond. Perhaps the biggest fish of all is Toshiba, which is one of the largest manufacturers of POS systems and other retail software and technology in the world through its Toshiba Global Commerce Solutions business. The company’s go-to-market vision Together Commerce embraces the changing way we shop and champions participation. Retail is no longer about isolated transactions, but an ongoing relationship between the retailer and the consumer.

Shot of TCx GravityTCx Gravity in action

Toshiba is leveraging its position in the market to invest in technology that caters for this evolving merchant-consumer dynamic. The company’s omni-channel retail software solution TCxGravity enables consumers to spread their purchasing journey across different devices and even in-store, while retailers also have the flexibility to turn any device into a POS terminal. Toshiba’s dominant position in the retail POS market alone means that Apple would be wise to start conversations with Toshiba if it’s looking to integrate with the big players in US retail.


Another obstacle is America’s loyalty card and coupon culture. It’s entrenched. Every large retailer has its own loyalty system – and consumers are heavily incentivised to use them. It’s less than likely these retailers will want to share their treasure troves of customer data with Apple.

The iPhone maker has already tried to jump on the loyalty card bandwagon with Passbook, launched in 2012. And while stats on its use are not available, a quick Google search shows that consumers are still unsure how to use the service.

Some of the newer, more focused retailers will jump on board with Apple Pay quite quickly because they’re targeting younger consumers and want to build a relationship with them. Apple says there are 220,000 US merchants on board, including players like Bloomingdale’s, Macy’s, Subway and McDonald’s.

But some of the biggest retailers – the ones that drive buying habits in retail – have other irons in the fire. Wal-Mart and Best Buy have already rejected the service. The former is supporting a rival payment service, while Best Buy briefly flirted with contactless technology, before abandoning the scheme in 2011.


Collaboration with other companies as equals is one thing; Together Commerce is about working with merchants to deliver a seamless and integrated user experience for the customer. But merchants might be wary of working too closely with Apple after witnessing what happened in the music industry. The arrival of iTunes more than a decade ago may have revolutionised the way consumers buy music, but Apple quickly gained a monopoly on the industry and still takes a 30% cut of all music purchased through the music service. Why would the country’s largest retailers want to risk a similar fate when they already have their own systems and partnerships in place?

iTunes ad

There remain a lot of moving parts to the mobile payments puzzle in the US. Success requires more than simply offering the ability to pay with your smartphone. Linking up with one of America’s top five retailers and persuading them to roll out contactless terminals is Apple’s best chance of sparking mass adoption. Some might argue that uptake of Apple Pay in the US is not as important as adoption in, say, China and Europe. But with Apple’s home country (along with the rest of the Americas) contributing more than a third of its quarterly revenue, the market’s importance can’t be understated.

Disrupting old, established industries is the name of the game in technology. And one day, payment methods will be revolutionised in the US. But I just can’t help feeling that Apple has a long way to go if it wants to be the company that convinces us to scrap the fantastic plastic – despite putting its money where its smartphone is.

Drew no longer works at The Frameworks


  • Apple
  • Retail
  • Commerce
  • Payment
  • Mobile payments
  • Together Commerce