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Apple Pay has a gaping hole

October 20, 2014

Apple Pay has not integrated customer loyalty programs, which are a big part of the customer-vendor relationship. 

Apple Pay was rolled out to the public today and some apparent weaknesses have already been reported. Chief executive Tim Cook has repeatedly described the mobile payment app as a safer alternative to credit cards because it does not retain customers’ personal data or transmit that data to merchants. Many merchants and retailers across the country are excited about the new technology, mainly because of the hype surrounding Apple Pay, but some are not as enthralled. Customer loyalty programs are a big part of the customer-vendor relationship and rewards cards are not yet included with the app. 

Panera Bread points out a fault with Apple Pay
BusinessWeek gave the example of Panera Bread, which has been an early adopter of apps and tablet deployment in their restaurants. Panera wants customer participation in any mobile payments system to provide a quick link to My Panera, its rewards program. Executive vice president at Panera Blaine Hurst does not like that Apple Pay would still require customers to hand over their rewards cards after using their smartphone to pay for an order.

“Obviously, that’s not where we want to be…Why can’t I just walk up to a cashier with my phone and all that information magically appears?” said Blain, according to BusinessWeek.

Some analysts believe that one of Apple Pay’s biggest shortcomings is the anonymity. Cash and cards have worked well for the most part and the new app does not seem to offer a compelling reason why previous methods of payment should be abandoned. Denée Carrington, analyst at Forrester Research, suggested that Apple Pay only offers customers a little bit of convenience – not much more. She also pointed out that customer data in many cases leads to more personalized and enjoyable shopping experiences.

“Data privacy is a double-edged sword,” said Carrington, added the news source.

Many retailers have still not accepted Apple Pay, including the nations’ largest – Wal-Mart. Not all point-of-sale devices are NFC enabled and Wal-Mart has opted not to upgrade its devices to accept payment from Apple’s smartphones. Alternatively, six of the nation’s biggest card issuers, which account for approximately 83 percent of credit card transactions, are partnered with Apple Pay, reported Market Watch.

Nonetheless, corporate credit cards, prepaid cards and loyalty cards are not integrated with Apple’s mobile payment system. Shoppers at Macy’s or Bloomingdale’s will not be able to use their smartphones to make purchases and earn points at the same time.  Richard Crone, founder of Crone Consulting, a payments advisory firm, estimated that merchants earn approximately 4 percent of sales with their proprietary cards. Crone commented that Apple needs to address the obvious gap in the technology.

“[Store-branded cards are] the big gaping hole in Apple Pay,” said Crone, reported Market Watch.

Meeting Apple half-way
Starbucks has taken a different route than other retailers. The coffee company has partially embraced Apple Pay and will allow customers to use Apple Pay to buy Starbucks credits through its mobile app in the next few months. Point-of-sale devices at Starbucks locations however, do not yet have NFC technology.

Panera and Starbucks bring to light the main issue that currently needs to be addressed with Apple’s new mobile payment app – loyalty programs. Many retailers see mobile payments as a way to create brand loyalty and become entrenched in consumer’s daily lives. Starbucks already accepts 15 percent of its transactions through its own mobile app. Linda Mills, a spokeswoman for the company commented how Apple Pay should not disrupt an already functioning system.

“You get all these benefits that we want to make sure won’t go away,” said Mills, reported Market Watch.

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