Source: Apple.
Everyone loves Apple (AAPL +0.64%) products -- except for the day they are unveiled, when half the world writes them off.
When Apple first released the iPod, an analyst said it "lacks the richness of Sony's product offering." Steve Ballmer wrote the iPhone off as "most expensive phone in the marketplace." The day the iPad was introduced, Steve Jobs was "annoyed and depressed" after receiving 800 emails from customers, most complaining. Apple went on to sell more than a billion of these products.
My turn to be skeptical of a new Apple product (and eat my words later) involves the new mobile payment system for the iPhone 6.
The feature lets you swipe your phone in front of a credit card machine to pay for stuff, which looks awesome.
But there's an important history here that makes me skeptical of mobile payments catching on in America.
One argument for growth in mobile payments in America is that the technology has already caught on in other economies, particularly Japan, South Korea, Africa, and Europe. In 2010, Japan did $22 billion of mobile payments, versus $1.5 billion in America, according to the Federal Reserve. In 2012, one in 600 credit card terminals in America was equipped for mobile payments, versus one per 130 in Japan and one per 100 in South Korea.
If other countries can adapt to mobile payments, why can't we?
There's at least one compelling reason why.
When other countries introduced mobile payments, they were largely cash-based economy – far more than America is, at least. This chart from 2007 register transactions shows the breakdown:
This is really important because for a new technology like mobile payments to catch on, it has to be an improvement over the status quo. In a cash-based economy, it clearly is: Mobile payments are easier, cleaner, safer, faster, and more convenient than lugging around a pocketful of euro coins.
But America is a card-based economy. And mobile payments are just marginally more convenient than cards, especially if you still need a wallet for your drivers' license and other items. So it's a harder sell to upgrade from card to mobile than it is from cash to mobile, as countries other did.
That's what the Federal Reserve found when dissecting the global market for mobile payments:
Mobile payments replace primarily cash transactions in Japan, while in the United States they would also compete with cash alternatives (checks, debit, credit, and prepaid cards). These electronic alternatives already offer many of the advantages of mobile payments, and they are widely accepted; therefore, the potential short-term benefits from adopting mobile payments in the United States are substantially lower than in Japan ...
Cash—the payment method that mobile payments typically replace in other countries—is used much less frequently here than in the countries where mobile payments are significantly more successful ... Moreover, recent changes in the U.S. debit card regulation (Reg. E) eliminate the need for merchants to give receipts for small dollar purchases, thus speeding up debit transactions and reducing consumers' demand for faster payment method alternatives.
The biggest problem with getting mobile payments to take off in America is that the current card system already works pretty well. People are generally happy with it.
No company is better than Apple at convincing consumers that they need something they didn't know existed a week ago. Maybe that will be the case with its mobile payments. I'd love to join the ranks of those proven wrong.
What do you think?
