Apple’s decision to invent arguably one of the world’s best mobile payment systems seems a really great move now as US consumers shift away from cash in response to the COVID-19 pandemic.
Apple Pay advances in the US
We know the COVID-19 pandemic has rapidly accelerated global digital transformation projects, nurturing new respect for fron- line and essential workers and prompting what seems likely to be a lasting move to work from home.
It has also driven mass adoption of mobile payments systems, according to the latest Worldpay Global Payments report. “2020 catapulted payments years ahead of projections,” the report says.
What’s important is that it is well known that the US had a slow start in mobile payment acceptance, though there is evidence to show that Apple Pay was already the most popular such service in the US pre-pandemic.
Discussing the state of mobile payments, Apple CEO Tim Cook told investors last year:
“As you can imagine, in this environment, people are less want to hand over a card… contactless payment has taken on a different level of adoption in it that, I think, will never go back. The U.S. has been lagging a bit in contactless payment, and I think that the pandemic may well put the U.S. on a different trajectory there.”
Toward a cash-free future
Mobile wallets are catching up with cash, even in the US. In 2020, 10% of spending at points of sale (cash tills) made use of a digital or mobile wallet such as Apple Pay. In comparison, 11.9% of such transactions took place in cash, so the use of contactless mobile payments is clearly catching up. (In Canada, cash was used for just 5.4% of transactions.)
These are global trends. Worldwide use of cash has dropped 42% since 2019. Cash will soon be the least used traditional payment method, the report said.
“Our new research shows that the world is entering a new phase of adoption of digital payment methods,” said Jim Johnson, Head of Merchant Solutions at FIS, authors of the report.
“The global pandemic has brought a cashless future closer on the horizon. The implications for merchants are profound. They must be building technology-centric strategies to meet the diverse preferences of consumers’ rapidly changing habits and do so in a way that drives financial inclusion for underserved communities around the world.”
Global problems, global reactions
This matches research that has emerged since the pandemic hit us last year. Mastercard has claimed 79% of people worldwide — and 91% in APAC — used contactless tap-and-go payments in shops, with 74% saying they intend to continue using contactless payments once the pandemic ends.
“Social distancing does not just concern people’s interactions with each other; it includes contact with publicly shared devices like point of sale terminals and checkout counters,” said Blake Rosenthal, executive vice president and head of Mastercard Acceptance Solutions. “
Visa’s 2020 Back to Business study found that 78% of consumers worldwide changed payment methods to reduce contact, while 67% of small businesses have adopted new payment technologies to keep their business on track.
The decline of cash
“COVID-19 is accelerating the pace of cash’s decline faster than even the most bullish projections,” the report said. “The pandemic accelerated the decline of cash by over three years, exceeding in 2020 our previous projection for 2023. Cash was used for 20.5% of global POS volume in 2020, a 32.1% reduction from 2019.”
Cash volumes dropped by more than half in the UK and in France.
In the future, FIS claims 52% of online purchases will soon be made with a digital wallet. This is already the leading online payment method in France, Germany, Russia, Spain, and the UK, the report said, and use climbed 60% in North America last year.
On a global basis, it’s certainly the time of Apple Pay. Mobile wallets represented 25.7% of transactions at point of sale, with the pandemic accelerating adoption of mobile wallets. WorldPay predicts cash will represent just 12.7% of global PoS volume by 2024 — and also states that mobile wallets will account for 47.9% of point-of-sale spending in APAC by then.
The inevitable march of Apple Card
Apple’s decision to introduce its own loyalty-based payment system with Apple Card has proved a shrewd one. It builds on the ascendancy of iPhone and Apple Pay, which has become one of the top three most widely used mobile payment services in Canada, Ireland, Italy, Russia, Saudi Arabia, Spain, UK, and the US. And, after a slow start, Apple’s mobile payment system is now supported at more than 90% of US stores.
The move to harness the power of one of the world’s most loved brands to a payment/loyalty system in Apple Card gels matches what Millennials and Gen Z’ers are looking for, the FIS research claims.
Forty-three percent of Millennials want brands to actively track spending for them and 47% will join a loyalty program if they can use an app to collect points and rewards.
Apple Pay meets all these calls, and the decision to offer Apple Card loyalty bonuses on a daily basis in the form of cash matches the desire 81% of consumers have to be able to use their rewards at places other than the retailer at which they were earned.
Though, in business terms at least, it does seem a shame, given the pace and scale of the global switch to mobile payments services during the pandemic, that Apple Card is only available in the US at this time. Expansion pre-pandemic might have helped generate even more increases in Apple’s services revenue streams.