Because of slack buyer interest and other obstacles facing mobile payments in the U.S., Apple and other companies must inject new features and inducements to boost adoption.
Apple is expected to announce at its Worldwide Developers Conference (WWDC), which starts Monday, new technology to combine customer rewards with its existing Apple Pay mobile payments service. That service launched last October.
The technology would allow customers to automatically get coupons, rewards, loyalty points and special offers from a specific retailer -- or from Apple itself -- applied when a purchase is made from an NFC-ready iPhone or Apple Watch.
Google recently announced at Google I/O that its upcoming Android Pay service would do something similar by combining rewards with payments when its service launches later this year alongside the older Google Wallet system.
But will it matter?
Too few retailers -- and credit card use is entrenched
A number of surveys and analyst assessments indicate that despite the excitement generated by Apple Pay, the U.S. buying public isn't very excited about making payments from a phone or watch when it's just as easy to use a credit card or cash.
The findings show that some customers are still worried about security and privacy, even with tokenization in NFC-based systems (like Apple's), which is more secure than magnetic-stripe credit cards -- by a long shot.
Also, many people who have tried mobile payments for in-store purchases find they use the system once or twice, then give up because so few retailers support NFC so far.
Apple in March boasted 700,000 locations supporting Apple Pay, which sounds like a lot. But it's still just a fraction of the estimated 12 million physical payment terminals in the U.S. It will take up to a decade for 90% of U.S. retail locations to install and support NFC terminals; it took Canada eight years to widely adopt smart card technology.
An IDC survey of hundreds of Americans and Western Europeans found low interest in making in-store payments with smartphones. "No one in the survey seemed that jazzed-up about using mobile payments," said IDC analyst Will Stofega, who said Apple, Google and other mobile payment providers now face a "slog" in winning over customers.
"Last year, I thought that with Apple on the scene, people would be using this stuff, and maybe they are in San Francisco and New York, but there really aren't that many elsewhere," he said.
Apple hasn't said much about actual number of users adopting Apple Pay. In January, CEO Tim Cook said Apple Pay accounts for two-thirds of dollars spent with contactless payments, which includes NFC. But the overall use of mobile payments is very low still, about 4% of all in-store payments in the U.S., according to an online survey released in January by Verifone, a company that makes in-store payment terminals.
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