Who is really using Apple Pay?

by: Lucinda Southern on 15 July 2015

The service launched in the UK this week, half a year after its release in America. But does anyone know about it?

Apple Pay launched in the UK 14th July, the first market outside of the US. Its success has been swift in America, within a few weeks of its October 2014 launch it made up 2% of digital payments, according to ITG Investment Research, with 220,000 customers signing up to it in the fourth quarter.

Can Apple expect this kind of uptake in the UK?

From July 14th owners of Apple’s iPhone 6 or Apple Watch who bank with financial services supporting the initiative (including Britain’s four biggest banks, HSBC, Lloyds, RBS and Barclay) will be able to use Apple Pay by scanning their credit or debit card into the Passbook app and use their phone to make payments of up to £20.

Along with the 250,000 UK retail sites that will accept this payment, a key use case for Apple Pay will be on London’s transport system, which allows for contactless card payments, and this smartphone integration further pushes the iPhone into a Londoner’s life-support tool.

According to the Financial Times, banks in the UK struck a harder deal than their US counter-parts, offering less money to Apple per transaction than in America. But revenue is not the key driver. “The proposition for Apple in the UK is more about building product sales and less about an extra revenue stream,” one banker said to the FT.

Barclays, which introduced its contactless platform bPay - along with wristbands, key-fobs and contactless stickers - earlier in July and marks Apple’s most active rival in contactless payments, at first was reluctant to support Apple Pay. However on the morning of its UK launch the bank released a statement saying “We are really excited about the launch of Apple Pay and can confirm that we will bring Barclays debit cards and Barclaycard credit cards to Apple Pay in the future.”

Apple Pay’s success in the UK will be monitored keenly, as the UK has an already mature penetration of contactless solutions, more so than America, according to Ovum principal consumer analyst Eden Zoller who spoke to The Memo.

But a key difference in adoption between markets in the handsets that users have; a quarter of iPhone users in the US have the iPhone 6 or 6 Plus, the models that support Apple Pay, according to data from Global Web Index. Alternatively in the UK, owners of model 6 and watch drop to 16%, significantly limiting the number of people able to use the service.

Speaking to retailers that accept Apple Pay at a busy rail station in London, one manager told me that no one had used the new 'tap and pay' method yet. Perhaps this is understandable, it's only been available for 24 hours.

Arguably Apple Pay interest may not have graduated much further out than tech circles in the UK; data from Google Trends shows internet searches really peaked in the US before its launch date in October. Comparative searches in the UK over the launch date were less than a fifth of what they were in the US.

It would seem less people in the UK are in the know about Apple Pay, and less have the handset on which they can make the service, both indicating uptake will be less aggressive than in America.

The banks are clearly onboard because mobile payment methods are rising and these are driving more incremental revenue, of which some will be passed on to Apple, but for more competitive rates. Another plus for financial institutions is that Apple won't have access to transaction data.

However if Apple are good at one thing it is altering consumer behaviour, so when more people come to learn about it more people will be using is. Currently though Apple Pay is only able to cater to a small, but growing, number of people at the forefront of shifting consumer behaviour, to which convenience and speed are the most valuable currencies.