What Will It Take For Apple Pay To Take Off In The U.S.?

Apple Pay is nearing its second birthday, and mobile payments are far from ubiquitous. The credit-card replacement, which lets you use an iPhone or Apple Watch to pay at retail stores, only touts a user base numbering in the “tens of millions,” according to Apple CEO Tim Cook.

Meanwhile, a survey from 2015 indicates that among a pool of 500 Americans, 42% prefer to pay for in-store purchases with a debit card; another 38% are more likely to reach for a credit card. Extrapolated out, that means some 256 million Americans were using plastic at the register last year. Meanwhile, Nilson reports there were 9.49 billion credit, debit, and pre-paid cards in circulation globally in 2014.

Apple has focused on partnering with banks and big-name merchants in an effort to make Apple Pay accepted in a wide spectrum of locations. Storefronts include Crate & Barrel, Whole Foods, Macy’s, Walgreens, and scads of other places that represent regular shopping choices for average Americans. In total, Apple Pay is accepted at three million locations in the U.S.—a big jump from just 200,000 locations at launch in 2014.

But while payment services like Apple Pay, Android Pay, and PayPal provide a good user experience, none of them are universally accepted. Given the current environment, what would it take for people to ditch plastic for mobile?

The key to getting mobile payments to take off in the U.S. may be a matter of focusing on two daily activities: eating and going places.

Dining Out

Right now, while a growing number of retail outlets large and small accept mobile payment methods, mobile payments for restaurants are still in their infancy. That’s not to say there isn’t interesting activity going on. Quick-service joints like Chipotle, Starbucks, McDonald’s, and Burger King have created their own mobile apps geared toward rewarding repeat customers with payments built in. This same approach has been so successful for healthy salad shop Sweetgreen that the company is currently beta-testing cashless stores. Quite a few of these apps allow customers to hook up their Apple Pay account to the app, rather than having to input credit card information.

But Apple Pay is also forging ahead in quick-service restaurants as a payment method in its own right. It lists McDonald’s, Panera, Dunkin Donuts, Subway, and Peet’s Coffee among stores that accept Apple Pay. Others like Johnny Rockets, Au Bon Pain, Baskin Robbins, and Chick-fil-A are said to be coming soon. This a good start, but in order for people to stop reaching for their wallets, Apple Pay really needs to be accepted broadly in all restaurants. That’s difficult, because restaurants that want to push their own loyalty apps may not be keen to accept Apple Pay.

However, people aren’t going to download an app for every restaurant they dine at. That’s why startups like Velocity, PaidEasy, and TabbedOut have created mobile apps that let diners pay for dinner with their phone at a variety of restaurants. But with a plethora of payment apps knocking at their doors, restaurant owners might be feeling the onset of fatigue around mobile payments. And a restaurant-specific payments app is another app that no one wants to download, especially because none of these apps has access to all restaurants.

This is why much of Apple’s recent focus is on its partnership with OpenTable, the reservation-making app with 37,000 restaurants on its platform. The company began testing mobile payments in 2014. However, so far, it hasn’t made much headway. Earlier this year, the company told me that roughly 450 restaurants are hooked into its payment method, 100 of which are in New York.

Meanwhile, getting customers set up with OpenTable payments isn’t exactly easy. Users have to navigate into their profile, and then their settings, to open payment settings and turn on Apple Pay. Once that’s configured, there’s no way to tell which restaurants allow OpenTable as a payment method.

So while partnering with apps might seem promising, it’s not necessarily the best way to work mobile payments into restaurants. In other parts of the world where mobile payments are more common, restaurants have changed their point-of-sale technology to accommodate digital payments. Restaurants in Europe have been bringing cordless payments terminals tableside for decades, while those in the U.S. have largely skipped out on this movement.

That could in part be because Europe long ago switched over to using chip-based credit cards requiring a PIN number (no one is about to hand over both their credit card and their PIN to a server). The U.S. has been slower to adopt this technology. In the last year, credit card companies pushed merchants to accept chip cards by refusing to accept liability for fraudulent purchases made on point of sale systems that didn’t accept them.

This change to chip cards could have ushered in a new era where restaurants accept credit cards or mobile phones at the table, rather than forcing servers to scurry off to some dark corner to process the bill. But alas, chip cards in the U.S. only require a signature, not a PIN code, which means there’s no impetus for investing in wireless terminals that might also accept Apple Pay. People can still sign for their bill at the table.

Transportation

Another factor that would help mobile payments take off is if you could use them to pay for more modes of travel. Already in London, iPhone owners can use Apple Pay to purchase fares on the tube. This functionality hasn’t yet come to the U.S., though the Massachusetts Bay Transportation Authority is planning to allow customers to start buying tickets with Apple Pay in September, according to Boston Business Journal. New York City’s Metropolitan Transit Authority also released a bid for proposals to incorporate mobile payments into the subway system this year, though the contract allows for a 69-month long implementation. Even if everything runs according to schedule—unlikely given the MTA’s track record with construction—payments won’t hit turnstiles for at least six years.

In the meantime, Apple is looking at other modes of transportation where digital payments can make headway. Ride-hailing apps Uber and Lyft already accept Apple Pay, but there’s still room to grow in the field of car travel. In March, Exxon Mobil integrated Apple Pay into its Speedpass+ app, so iPhone users could pay for gas and car washes with Apple Pay at 6,100 locations.

While refueling is something all drivers must do, it’s not a daily activity (I hope not, for your sake anyway). A more likely daily expense is parking. To that end, there are apps that connect drivers with parking garage spots, including SpotHero and Parking Panda. PaybyPhone, an app that lets people pay for metered parking, also accepts Apple Pay.

But again, more is more when it comes to mobile payments. That means that every gas station a driver pulls up to has to accept mobile payments in order for people to make the behavioral jump. The same goes for parking or any other daily purchase. If a consumer has to think about using Apple Pay versus plastic, mobile payments will never break into the public consciousness.

How long could all this take? A very long time—even with the given pace of innovation. Legacy systems have a way of lingering, and new systems for restaurants, public transit systems, and gas stations are likely to roll out slowly.

In the meantime, the next big step for Apple Pay becoming more widely accepted will be building it into Apple’s own browser. The company’s new versions of iOS and macOS, available soon, will let online merchants accept the payment system inside Safari. So even if Apple Pay is nowhere near being available at every store and restaurant, it will soon span multiple platforms: at brick-and-mortar establishments, in apps, and on the web.