Apple earlier this month announced enhancements to Apple Pay, which was introduced in the fall, and Google said it will soon launch Android Pay, its Google Wallet successor. Amazon dropped out of the digital wallet race earlier this year but could return. Samsung is about to enter the market after buying Massachusetts-based LoopPay in February.
Quietly waving and tapping a personal device to buy jeans or a burrito could one day become as ubiquitous as the old cash register “cha-ching,” but tech companies must still overcome challenges before they can persuade consumers — and, just as importantly, the stores that sell to them — to phase out magnetic stripe cards in favor of “near-field communication,” or NFC.
“I’ve been paying for a while with my phone,” said Google CEO Larry Page, speaking at the company’s recent annual shareholder meeting. “First time you pay with a phone, and you don’t have to pull out your card, mess with entering codes and signing things and so on, it’s a pretty great experience.”
Outside the gadget-loving world of Silicon Valley, however, not that many Americans are yearning for that experience. Seventy-five percent of U.S. consumers who don’t use smartphones to make purchases have no desire to change that practice, believing it’s easier to pay with cash or credit and debit cards, according to a March survey by the U.S. Federal Reserve.
“People still don’t see why they should bother with mobile payments when a little plastic credit card is just as easy,” said Matt Schulz of CreditCards.com. “It’s understandable that people are a little reluctant because it represents a major change to something we’ve been using in pretty much the same way for decades.”
But the momentum is moving toward wider adoption. The biggest propeller of change could be an October deadline set by the U.S. credit card companies Visa, MasterCard, Discover and American Express. In a joint move to reduce credit card fraud, the companies want retailers to switch over to enabling “chip-and-PIN” payments, accepting cards that rely on integrated circuits and personal identification numbers rather than magnetic stripes and hand-signed receipts.
While “chip-and-PIN” is different from the radio communication technology adopted by Apple and Google, retailers who need to overhaul their store terminals are likely to include both systems. And an entire industry of digital payment innovators — from PayPal and San Jose standard-bearer VeriFone to startups such as Square and Bedier’s Poynt — are working on getting better terminals in time.
All of this is moving toward a shopping experience that could give Silicon Valley companies far more information than they already have about consumer buying habits, pairing data collected online with real-world transactions that could be valuable to advertisers. Apple is also collecting from banks 15 cents from each $100 purchase, but Google will not earn fees, according to news reports.