Now that my local grocery store accepts Apple (NASDAQ:AAPL) Pay, it's become my primary payment method. I remain an anomaly, however, as it's estimated only a small percentage of people with an Apple Pay-capable device actually use the service regularly.
On Monday, at Apple's WWDC Keynote, the company announced several updates for Apple Pay. Most notably, the company is adding rewards cards and it's expanding to the U.K., where it will include support for London's transport system.
Rewards cards -- the missing ingredient
When Apple announced Apple Pay last fall, rewards cards were a glaring omission. Carrying and using rewards cards when the opportunity presents itself is a pain point for most shoppers. The ability to automatically use those cards without any prompting solves that pain point.
Apple is partnering with several retailers and restaurants to start, but any company that had a Passbook app should be able to work with Apple Pay in the near future. And that's key, as retailers have largely been skeptical of Apple's payment system due to the fact that it keeps user data private. Not even Apple is able to see those data. But adding rewards cards gets around that hurdle.
When shoppers pay with a credit card, retailers are able to gather names and card numbers and can use those to look up other information like addresses, phone numbers, and emails. It can use all that along with purchase data to send well-targeted promotions to customers.
Apple tokenizes credit card numbers, which prevents retailers from accessing and looking up data on its customers that pay with Apple Pay, but using a rewards card is an easy way for retailers to work around that problem, since a customer must volunteer his information to receive the perks of the rewards card.
Customers want those perks just as badly as retailers want their shopping data. Apple Pay is now providing a simple solution so customers can always use their rewards cards even when they leave them at home. So, not only are retailers incentivized to accept Apple Pay, customers are incentivized to use it.
Going Underground in the U.K.
Apple will expand Apple Pay to the U.K. next month, and the service will support contactless payments on London's transport system. Public transit is one of the best use cases for contactless payments, and many systems support NFC-enabled fare cards. Replacing those cards with an iPhone, or better yet an Apple Watch, offers a better solution, since it doesn't need to be reloaded.
In London, iPhone owners simply "touch in" and "touch out" with their iPhone instead of their Oyster card. They'll be charged the standard pay-as-you go fee from their primary Apple Pay card. This could be a big win for Apple, considering about one in 10 contactless payments in the U.K. are on the Transport for London services.
If Apple can make similar partnerships with other big city transit services, it could give consumers another reason to use Apple Pay instead of reloading cards over and over again.
Giving them a reason to use Apple Pay
The first iteration of Apple Pay didn't offer a huge advantage over swiping a credit card for many. Although the experience is dead simple, many can't seem to shake the habit of breaking out the credit card. Including rewards cards will enable customers to leave a wallet full of rewards cards in a drawer and still receive all the perks. Working with transit systems will get more people using Apple Pay, even for those small payments. Ultimately, both of these new developments will get people thinking of their iPhone and Apple Watch as a payment option instead of a gimmick.
If Apple is going to succeed in capturing its share of the multitrillion-dollar payments industry, it needs to change the way people think. Otherwise Apple Pay will be confined to use by nerds like me.