Are retailers shooting themselves in the foot with Apple Pay U-Turn? Reaction from Carat, DigitasLBi, Somo, IAB

Apple chief executive Tim Cook hit out at the retailers, including Walmart, CVS and RiteAid, for dropping Apple Pay, but said the blow will be a drop in the ocean when the app is released worldwide.

The Drum caught up with industry insiders to gauge their views on the implications for Apple and the opportunities for retailers in the increasingly competitive space.

Ashley Smith, strategy director, Carat

Adoption is arguably one of the greatest barriers to success for mobile payment providers. Irrespective of how compelling a payment proposition may be, it needs to find its way into the hands of the shopper. With the exception of proprietary solutions, which are already built into software/hardware (like Apple Pay), alternative services like Current C will need to work (and spend) very hard to achieve this: these apps will not download themselves.

Apple has already overcome this barrier; 10 million Apple Pay enabled devices (the iPhone 6 and 6+) were shipped in the first three days of sale, with countless more predicted to fly off the shelves this quarter (demand still outstrips supply). As a result, Apple Pay is in the hands of many millions immediately. This distribution has helped ensure that one million credit cards were activated on the Apple Pay service within 72 hours.

Despite Walmart opting-out of Apple pay, finding a network of retailers to support a launch is a likely obstacle all aspiring payment providers will have to overcome. However, for every Walmart, there is an Alibaba: the billionaire CEO of Alibaba, Jack Ma, has said he is “open to working with Apple on payments”. A partnership between the two giants could help establish Apple Pay as the dominant force in mobile payment before competitors have even reached the market.

Retailers are ultimately shooting themselves in the foot by making it harder for consumers to adopt mobile payment as a new behaviour. By opting out of Apple Pay, and becoming yet another native mobile payment provider, Walmart is at risk of making the world of mobile payment increasingly confusing, frustrating, and ultimately un-navigable for the consumer. Perhaps the sensible thing to do would be to allow Apple Pay to create the much-needed step change in mobile payment, and follow suit once mobile payment has become accepted behaviour, with a more compelling proposition."

Ilicco Elia, head of mobile, DigitalLBi

In the US, Apple's entry into the payment space has illuminated existing fault lines running between retailers and card companies around card processing fees. The timing of the decision to block NFC-based contactless payments by RiteAid and CVS, and consequently block Apple Pay, is an attempt to favour the rival barcode-based CurrentC payment system is a reflection of the nervousness around Apple's ability to drive new user behaviour.

Retailers prefer CurrentC because it is directly linked to a consumer's bank accounts and retailers are therefore able to side-step card processing fees. In the US this will irritate consumers and may stifle the uptake of mobile payments, but it's hard to see retailers persisting with the inferior experience of CurrentC in the longer term.

In the UK and other European countries we are unlikely to see a similar scenario because much of the infrastructure for payments in general is up to a decade ahead of the US. Until this point the focus had been on the lack of EMV ('chip and pin') cards in the US, but the rise of mobile payments highlights a similar facet for NFC-based contactless payments. A large number of UK credit (28.8 million) and debit (19.5 million) cards already support contactless payments and there are nearly five times as many contactless-ready payment terminals per capita in the UK than in the US. In June of this year contactless payments volume in the UK exceeded £150m for the first time, a year-on-year increase of 238 per cent.

As a result retailers would have substantially more to lose if, like CVS and Rite Aid in the US, they chose to disable NFC-based contactless payments on their terminals. More to the point, there's no comparable initiative to CurrentC in the UK or Europe. Nonetheless, the issue does raise questions around retailer priorities as we look ahead to the death of cash and an increase in mobile device mediated payments. It certainly won't be the last time an effort to maximise retailer margins results in pain for consumers in the mobile payment space.

Emma Crowe, senior vice president, strategy, Somo

While we love a great tech battle, retailers are not well positioned to win in mobile payments, and quite frankly, they shouldn’t try to be. These businesses should remain focused on their core competencies - buying and selling goods. As they are neither tech nor finance companies, they are not well suited to compete in the payments space - a market long owned by banks and credit card companies.

Much recent innovation can benefit retailers, such as click and collect and delivery by drones. Rather than forcing entry to uncharted territories, these technologies allow businesses to focus on traditional mechanisms for success in the retail market: inventory turnover and customer satisfaction.

Apple understands this and has not attempted to leapfrog these giants, instead partnering with them in order to do what they do best: facilitate a beautiful, quick and easy solution for the consumer. Apple Pay launched in partnership with 500 banks, and thus the tech company is leaving transaction ownership to the experts -- a move that retailers would be wise to follow if they insist on going their own way.

Perhaps most importantly, none of this will be relevant in a year’s time as we are likely to be paying more by touch ID, facial recognition, or whatever the next evolution in payments brings. History backs this up: 2003’s SimPay mobile payment consortium promptly shut down and was swiftly forgotten in June 2005, and several others have tried and failed to steal market share from the bank when it comes to mobile payments.

Therefore, it is in the best interest of marketers to continue to proceed assuming that Apple Pay will continue to increase in adoption, but that no one platform has officially won the war. The key is to focus on the customer journey from awareness and consideration to advocacy and loyalty, keeping in mind that much of this now happens on mobile devices.

Ultimately, this is about a data ownership war and controlling mobile payments is not the only way to win.

Alex Kozloff, head of mobile, IAB

The mobile wallet has been a hot topic of conversation in the mobile industry for as long as I can remember, so after a few years of hype, it seems like finally things are moving forward. I think its good news to see major players such as Apple and the large US retail brands involved in CurrentC taking mobile wallets so seriously.

Competition often drives innovation and it's these giants investing in mobile wallet technology in 2015 could even mean the mobile wallet becomes mainstream next year. As long as the user benefit is there for both services there doesn’t seem a reason why they can’t coexist and create a world where you really can do everything on your smartphone.

Erfan Djazmi, head of planning and mobile, Essence

It is no surprise that retailers have cut Apple Pay – they save on extra fees paid through credit card payments, secure consumer data via their own solution and protect themselves against Apple’s dominance on their retail infrastructure.

But neither Apple nor retailers will decide the fate of the mobile payment landscape. Consumers will.

Consumers will likely be the architects of the mobile payment market and will look for an easy, quick and safe payment solution vs. the current method of contact less cards. A dated QR code style method of CurrentC just may not cut it for consumers.

In an increasingly fragmented mobile payment market, consumers may opt for familiarity, brand affinity and security on their desired method. And if that method isn’t available they will demand it from their retailers.

Retailers are not Apple’s only hurdle. Growing the category and migrating consumers from contactless cards to mobile payment through key differentiators is a big focus and challenge for Apple.

Advertisers can benefit from Apple Pay scaling. If Apple link payment data with their iAd ad network, advertisers can benefit from attributing display advertising to ROI in-store sales based data - a significant USP in the digital media landscape.