Why Apple Pay is slumping

BI Intelligence

The percentage of eligible users who use Apple Pay dropped from Q1 to Q2 of this year, according to a new installment of the PYMNTS.com and InfoScout Apple Pay Adoption Tracker. In March, 15.1% of users surveyed had used Apple Pay, but in June, that number dropped to 13.1%.
Apple Pay is still facing significant hurdles:

• Customers are still struggling to see the benefits of using Apple Pay over another payment method. 32% of iPhone 6 and 6 Plus users who said they didn't use Apple Pay cited satisfaction with their current payment method, and 34% felt like they didn't understand how the software worked.
• Apple Pay still is not widely accepted. Apple Pay was accepted at 700,000 retail locations as of March, but those locations only represent a handful of major US retailers. And a sizable chunk of national merchants are currently working to roll out their own competing mobile wallet, CurrentC. Until Apple Pay's presence becomes less fragmented and more commonplace, there probably won't be any tectonic shifts in usage. That said, 75% of shipped US terminals were NFC-enabled in 2014 which means that the base of merchants that can accept Apple Pay is growing quickly.
• Not all iPhone users have Apple Pay-capable devices. 40% of active iPhone users had upgraded to iPhone 6 or 6 Plus as of March. This leaves a large user base who might be interested in using Apple Pay but lack the hardware to do so.

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The Apple Watch probably hasn't lifted Apple Pay volume much. The Apple Watch could provide a better Apple Pay experience than the phone which would conceivably boost usage. But the percentage of consumers with an Apple watch combined with spotty Apple Pay acceptance among merchants would severely limit its potential as a contributor to volume.

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