Overcoming Barriers to Widespread Adoption of Cashless Payments: The Case of Apple Pay in the USA

Apple Pay is a digital wallet that allows users to make payments through a secure and convenient contactless payment technology. Despite its benefits, there are still some hurdles that prevent the widespread adoption of cashless payments like Apple Pay in all stores across America. This article explores these barriers and provides insights into how they can be addressed to promote the use of digital payment systems.

Understanding Apple Pay

Apple Pay is a form factor for an existing account which is usually accessed with a physical card. It leverages Near Field Communication (NFC) technology found in the seller's card acceptance device. The NFC implementation typically requires the replacement of older magnetic stripe reading cards. This covers the receivables side of the equation.

The payables side of the equation, however, requires the payment card's account issuer to be part of the “X-Pay” ecosystem which comprises companies like Apple, Samsung, Google, and others. Digitising and tokenizing the credit/debit card enhances security as the actual card number is not stored on the device and never used in the transaction. Being part of the X-pay ecosystem, however, comes at a cost to the issuer. This is a significant challenge for some issuers who may either refuse to pay or take a long time to join.

The Digital Transition and Its Challenges

These days, tokenization and the prevalence of NFC devices in most countries support digital-first online applications. In Hong Kong, for example, a tokenized card can be pushed to a new customer's wallet within a few moments of starting the application. In the old magnetic stripe days, this process could take 2-3 weeks.

Any merchant whose terminal can accept a tap-and-go NFC chip card from major networks like American Express, Mastercard, or Visa can accept Apple Pay, provided the consumer's card issuing institution is part of the X-pay system. However, the adoption rate of NFC technology in America is relatively low compared to other markets in Europe and parts of Asia and the Pacific. For instance, Australia was virtually fully NFC enabled with chip cards and PINs at point-of-sale (POS) back in 2013, with ANZ Bank being the first to join the Apple Pay ecosystem. Others, such as NAB, took years to follow.

Current Status and Potential Solutions

It is important to note that almost every business that accepts credit cards can also accept Apple Pay. However, many businesses do not opt for it due to various reasons. According to a press release from Apple, about a year ago, 74% of the top 100 merchants in the US and 65% of all retail locations across the country supported Apple Pay.

Among those who do not yet accept Apple Pay, some businesses choose not to do so, while others simply do not know they have a choice. Major retailers like Walmart and Kroger accept Apple Pay, and many small shops and stores do as well, though they may not be aware of it. Business owners who do not accept Apple Pay are often encouraged to start doing so, as it can influence where people choose to shop.

To further promote the use of digital payment systems like Apple Pay, efforts should be made to:

Education: Increase awareness among merchants and consumers about the benefits of digital payments and how to integrate them into their daily operations. Incentives: Provide financial incentives or rewards for businesses that adopt digital payment systems. Infrastructure: Improve the infrastructure for NFC and other digital payment technologies to ensure widespread compatibility and reliability.

In conclusion, while there are valid reasons why cashless payments like Apple Pay are not yet fully embraced in all stores across America, these barriers can be overcome through education, incentives, and improved infrastructure. Ultimately, the benefits of a cashless payment system, such as security, convenience, and efficiency, make it a worthwhile investment for both businesses and consumers.