Consumers Want to Use Apple Pay, But Find Merchant Acceptance Lacking: Survey

It’s a familiar refrain in payments: For consumers to use a payment method there has to be places to use it. Apple Pay, it seems even with all of the hoopla surrounding it, is no different.

That’s what a recent report from Phoenix Marketing International, a Rhineback, N.Y.-based firm, has found out. Consumers with Apple Pay accounts are outpacing places where they can use the near-field communication (NFC) mobile payment service. The survey of more than 3,000 consumers found that 47% of respondents stepped inside a merchant location that was supposed to accept Apple Pay, but didn’t. The other side, of course, is that they could use at 53% of stores.

That, however, doesn’t mean Apple Pay users are sour on the service, George Weed, director of card research, tells Digital Transactions News. “There is no evidence Apple Pay users had problems it turned them away,” Weed says. “It just means [merchants] aren’t getting all the sales they could. It’s just there are more transactions that could be rung up than are.”

The report says that 11% of credit card-owning households have an Apple Pay account, as do 66% of iPhone 6 owners. Most—82%—linked a credit card to the mobile payment service; 53% a debit card; and 20% a general purpose prepaid card.

Phoenix also found that 88% of Apple Pay owners used the service in the four months from October to February, when the survey was conducted.

Apple Pay users have encountered issues when using the service at the point of sale. Notably, the amount of time spent waiting for the transaction to process ranked as the top complaint, 48%. That was followed by cashier unfamiliarity, 42%; transaction posting errors, 36%; non-functioning NFC reader, 27%; inconvenience in selecting card in Passbook, 23%; and consumer familiarity with the service, 14%.

These problems were a bit surprising, Weed says. “The fact there were any checkout problems, I assumed was with the wallets of the past.”

Some of the issues, such as inoperable readers and cashier unfamiliarity, may be alleviated as more merchants upgrade their POS terminals to accept EMV chip cards. Most of the POS terminals shipped in the past few years also are NFC-capable.

But, that also harbors a note a caution, Weed says. “The merchant doesn’t want to do two upgrades,” he says. “They want to do one.”

While many of the largest merchants are preparing for EMV, smaller merchants are reluctant to make the upgrade because they assume they are less likely to be targeted by fraudsters, an assumption that is ill advised, says Leon Majors, senior vice president at Phoenix, and co-author of the Apple Pay report.

The problem is the lack of communication about the risk for smaller merchants, he says. Without the same sense of urgency, smaller merchants may be slower to adopt EMV terminals, and with the NFC capability that usually accompanies these devices.

Small merchants are critical to expanding NFC, and EMV, acceptance. Acquirers should be pushing educational materials to merchants, Majors says.

At the heart of this era of smart phone-enabled wallets, with Samsung Pay coming this summer and Google Inc. working on a revamped Google Wallet, is the battle over smart phone sales, Weed says. “The battle is about phones.”

“The investment Samsung made is about stemming Apple from poaching their customers,” he says, adding that Android is still 50% of the smart phone market, and [Google] is trying to hang on to it.

“Apple is not the only company selling phones,” Majors says, with payments caught in the crossfire.