MCX Stalwart Best Buy Gives Apple Pay a Boost As Apple Records Strong Quarter

Apple Inc.’s Apple Pay mobile-payments service will be accepted by electronics giant Best Buy Co. Inc., first for in-app purchases and then, later this year, in all of its 1,050 U.S. stores, Apple chief executive Tim Cook said Monday. Cook also announced that some 50 hospitals have agreed to accept Apple Pay at their registration and check-in counters, giving the highly publicized service a stronger entrée in the huge health-care market.

Best Buy’s move lends further momentum to Apple Pay, which earlier in the day won support from Discover Financial Services, the last major card network to sponsor the 6-month-old payments system. Discover says consumers will be able to begin using their Discover credit and debit cards with the Apple Pay wallet this fall.

“We’re seeing great momentum with Apple Pay,” Cook said in remarks opening an earnings call with stock analysts to discuss Apple’s results for its fiscal second quarter, which ended March 31. “We continue to see great progress with merchants.”

Cook also pointed to consumer reaction to the Apple Watch, which only became commercially available Friday. The so-called smart watch performs a number of functions, among them Apple Pay transactions when working in concert with an iPhone 6, 6 Plus, or 5.

So far, Apple has sold the product only online, with demand outstripping supply, Cook said. “It’s been really great to see the reaction of customers since Apple Watch became available,” he noted during the earnings call. “Customer response has been close to 100% positive. It’s hard to imagine it being better.”

Apple did not release any numbers for the Watch other than to note that some 3,500 apps are available for it in Apple’s App Store, compared to 500 for the first iPhone when it launched in 2007 and 1,000 for the iPad when it was first released in 2010.

Best Buy’s decision to accept Apple Pay is notable in part because the chain is a strong supporter of Merchant Customer Exchange LLC (MCX), a retailer-controlled consortium that is working on its own mobile wallet called CurrentC. MCX has maintained a skeptical stance toward Apple Pay and other wallets that enable transactions on the major card networks, which the MCX merchants see as promoting high-cost payments.

Indeed, MCX has maintained an exclusivity policy requiring member merchants to support its wallet only, though the company has said this policy was not meant to be permanent. When Apple Pay launched in October, two pharmacy chains belonging to MCX, Rite Aid and CVS, switched off their contactless terminals to prevent Apple Pay acceptance in their stores. The move, however, proved to be short-lived.

Best Buy itself has had a rocky relationship with contactless payments, dating back to late 2009 when it stopped accepting Visa payWave transactions in its stores after Visa reportedly refused to support lower-cost PIN authentication. Apple Pay relies on near-field communication (NFC), a form of contactless payment.

For the quarter, Apple sold 61.2 million iPhones, up 40% over the result for the same quarter last year. Roughly one-fifth of the active installed base of iPhones have been upgraded to the new 6 and 6 Plus models so far, Cook said, leaving “plenty of upgrade headroom.” In addition to supporting Apple Pay transactions, the iPhone is also used by merchants to perform mobile transactions in the field.

Sales for the iPad tablet, however, dwindled 23% to 12.6 million units. The device is often used by merchants to support fixed and mobile point-of-sale systems. During the call, Cook said he “strongly” believes iPad sales will start growing again, though he added he could not predict when.

In other results, Apple recorded nearly $5 billion in so-called services revenue, up 9%. This was driven by a 29% increase in revenue for the online App Store, the company said. At its 437 Apple stores worldwide, customer visits increased 22%, Apple said, in the wake of the new iPhone introductions. Overall, company revenue clocked in at $58 billon for the quarter, a 27% increase year-over-year.

“It’s tough to find something in the numbers not to like,” Cook said, referring to the quarterly results.