Early days, but Apple Pay struggles outside US

 03 Jun 2016 - 9:53

Early days, but Apple Pay struggles outside US
Signs are placed on a table to show how to pay using the Apple Pay service at an Apple store in Beijing.


By Matt Siegel, Jeremy Wagstaff and Eric Auchard

More than 18 months after Apple Pay took the United States by storm, the smartphone giant has made only a small dent in the global payments market, snagged by technical challenges, low consumer take-up and resistance from banks.
The service is available in six countries and among a limited range of banks, though in recent weeks Apple has added four banks to its sole Singapore partner American Express; Australia and New Zealand Banking Group in Australia; and Canada’s five big banks.
Apple Pay usage totalled $10.9bn last year, the vast majority of that in the United States. That is less than the annual volume of transactions in Kenya, a mobile payments pioneer, according to research firm Timetric. And its global turnover is a drop in the bucket in China, where Internet giants Alibaba and Tencent dominate the world’s biggest mobile payments market — with an estimated $1 trillion worth of mobile transactions last year, according to iResearch data.
Anecdotal evidence from Britain, China and Australia suggests Apple Pay is popular with core Apple followers, but the quality of service, and interest in it, varies significantly.
To use Apple Pay, consumers tap their iPhone over payment terminals to buy coffee, train tickets and other services. It can be also used at vending machines that accept contactless payments.
Apple Pay transactions were a fraction of the $84.5bn in iPhone sales for the six months to March, which accounted for two-thirds of Apple’s total revenue. In Australia, where Apple Pay launched a month ago, payment machines supported by one mid-sized bank reported frequent failures.
“Bendigo Bank is experiencing some unforeseen technical issues in accepting Apple Pay payments at selected merchant terminals,” a spokeswoman for the bank said, adding that a lack of wider industry engagement in launching the service limited the lead time in testing the new technology.
Apple Vice President Jennifer Bailey said such experiences were premature and not representative. “Like any set of major technology changes, it takes time,” she said. “We want to move as quickly as possible, we push it as quickly as possible.”
Facing a slowing smartphone business, Apple has taken on the payments market hoping to add ways to make its devices more appealing, and more revenue streams. Apple takes a cut of up to 15 cents in the United States on every $100 spent.
While it has long mastered the supply chain for its mobile devices, the payments ecosystem has proved harder to control, and banks in other countries have reportedly negotiated lower transaction fees, contributing to its slow global roll-out.
Apple nearly doubled its R&D spending to more than $8bn in 2013-15 as it pushed out a wave of new products including Apple Watch and Apple Pay, as well as upgrades to existing hardware devices and new services.
Apple has leveraged its huge U.S. user base to push Pay, but has met resistance in Australia, Britain and Canada where banks are building their own products.
“Payments in general is such a complicated system with so many incumbent providers that revolutionary change like this was not going to happen very quickly,” said Joshua Gilbert, an analyst at First Annapolis Consulting.
The upshot: Apple has rolled out Pay in a dribble, adding countries and partners where it can — Hong Kong is expected to be added next — resulting in an uneven banking landscape with users and retail staff not always sure what will work and how.