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How did Apple Pay perform in its first quarter?

Eighty percent of Panera's mobile payments came from Apple Pay in Q1 2015. But 80 percent of how much?

January 30, 2015 by Brenda Rick Smith — Editor, Networld Media Group

Will 2015 be the "Year of Apple" pay, as proclaimed by Apple CEO Tim Cook earlier this week?

It's hard to tell at this point, according to Will Hernandez, editor of Fast Casual sister publication Mobile Payments Today.

Panera was one of the first restaurants to jump on board when Apple Pay was announced back in September. According to Will's report, 80 percent of Panera's mobile payments now come from Apple Pay.

Eighty percent seems really impressive, until you stop to ask, "80 percent of how much?"

Hernandez says:

In general, contactless transactions in the U.S. account for a small percentage of overall payment volume. Again, Panera is doing 80 percent of its mobile transactions via Apple Pay. But that's 80 percent of what exactly. You can see how it's easy to look at Apple Pay's early "success" with a glass-half-empty mentality.

What's the potential?

Apple sold almost 75 million new iPhones worldwide in the first quarter, which ended Dec. 31. Apple did not break the numbers down by region, but Hernandez thinks it's safe to assume that most were sold in the U.S. where Apple Pay is active. But how many are actually using Apple Pay? According to Hernandez's post:

• Steve Weinstein, an analyst at ITG Investment Research Inc., told Reuters that some 20 to 30 percent of consumers who buy either the iPhone 6 or the iPhone 6 Plus activate Apple Pay, but a smaller percentage use it consistently.
• According to an InfoScout survey this holiday season, only 4.6 percent of 170,000 households with an iPhone 6 device used Apple Pay to purchase items at retailers who accepted it during the first week of the holiday shopping season. Thirty-one percent said they didn't pay with Apple Pay because they were unaware that the retailer accepted it, and 25 percent simply forgot to use it.

It's pretty hard to break the card-swipe habit, especially if it doesn't feel like there's a big payoff. 

The Loyalty Problem

One potential payoff for consumers -- and restaurant marketers -- is the ease and convenience of integrated loyalty.One of the most promising aspects of Apple Pay and other mobile wallet solutions is their ability to get payment and loyalty all in one place.

"Back in the old days, like 12 months ago, consumers would swipe a plastic loyalty card and then swipe a plastic credit/debit card to complete transactions," says Mark Tack, VP of Marketing for Vibes. "Nowadays, this same process can all be done through the smartphone with Apple Pay and Passbook (for iPhones) and Google Wallet (for Android phones)."

Apple's Passbook lists digital loyalty cards and offers right below consumer's credit cards. (You can take a look a Passbook here, in a video interview recorded just a few weeks before the Apple Pay announcement.)

Sounds simple for consumers, right? But, there's a catch. Loyalty cards aren't yet able to be linked with payment cards, says Tack, so customers still need to present their loyalty cards separate from the transaction, whether they present a physical card or show the cashier their phone or by some other method. Ideally, customers would not need to present a loyalty card, it would just be processed simultaneous to the payment action.

But Tack sees hope on the horizon.

"While the mechanics aren’t quite in place yet to directly link a loyalty card and a payment card, the technology is heading in that direction and what the consumer has right now is way better than traditional methods," he says. "Mobile wallets like Passbook and Google Wallet eliminate the need for paper and plastic, they help keep all shopping items organized, and they offer value-add features like location reminders and lock screen notifications."

Getting payment and loyalty all in one place has payoffs for marketers, too. Integrated payment and loyalty has the potential to increase loyalty program use, now that activity is automatically recorded every time a contactless payment is made. That means more data captured, which means more opportunities to understand consumer habits and deepen customer engagement.

What's ahead

Apple Pay and other mobile payment providers also stand to gain ground this fall when the merchant liability shift takes place. More merchants will have the ability to accept contactless payments when they switch to EMV-enabled terminals. Many POS providers have announced Apple Pay integration, including NCR Mobile, ShopKeep and Square.

Hernandez seems optimistic about the future of Apple Pay:

At the end of the day, I think Apple Pay is in a good place. It's not a runaway success just yet, but Apple will make that happen soon enough. I don’t doubt it because it’s Apple. And we still need to keep in mind the payments industry is a funny and difficult business.

Image courtesy of Flickr user John Karekatsanis. See Creative Commons license here.

About Brenda Rick Smith

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Brenda has more than 20 years of experience as a marketing and public relations professional. She invested most of her career telling the story of entrepreneurial non-profit organizations, particularly through social media.

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