Will the Marketplace Adopt Apple Pay?

Under the leadership of Steve Job and Tim Cook, Apple, Inc. has displayed the Midas Touch.

With its array of innovations such as the iPod, iTunes, iPhone, iMac and the iPad, Apple has become the biggest and most powerful corporation on the planet in terms of market capitalization.  In the news conference introducing the two new iPhone 6 products, Cook also introduced yet another innovation Apple Pay.  This allows for customers to make purchases by simply swiping their iPhone 6s to record the purchase and automatically debit the money from the customer’s bank account.

The question is will the marketplace adopt Apple Pay?

There is some doubt in the Harvard academic community.  Two Business School professors think Apple will have some trouble.

“What does it do for me as a consumer?” is the question posed by Associate Prof. Benjamin Edelman, in an article in the Oct. 15, 2014 issue of Harvard Business School Working Knowledge entitled: ‘Apple Pay’s Technology Adoption Problem.’

“Why would I want to trade for something that already works (e.g. credit and debit cards), something that doesn’t complain when it get wet in the rain, something that doesn’t complain when I launder my pants?”, says Edelman.  He adds that these cards also often give users 1 or 2 percent off the purchase price.  “I think Apple has its work ahead in convincing thoughtful and potentially skeptical customers.”

The other Harvard Professor, Willy C. Shih, is skeptical of how the retail end of the Apple Pay concept will function.  “Apple must convince merchants to adopt its service,” says Shih.  “Only about 10 percent of retailers use NFCV readers, and at least one retailer – Best Buy – stopped using them because they were too expensive.  Officials with both Best Buy and Walmart have said the retailers have no plans, at least right now, of accepting the new payments technology in their stores.”

Classic Case in Adoption of an Innovation

The Apple Pay situation brings to mind the classic text-book principles of how and why innovations get adopted.  According to these basic principles of marketing an innovation will be adopted if it can properly address the following criteria and produce observable improvements.  Let’s put Apple Pay to the test:

Relative Advantage – Marketing principles say the innovation will have a good chance of adoption if it can prove to be advantageous over the existing product or service.  Is Apple Pay more advantageous than the credit card?  The Visa/Mastercard is accepted virtually everywhere; Apple Pay will not be.  Is it easier to reach for your cell phone or reach for plastic in your wallet?  No difference, really.

Compatibility – This refers to the need to change the way one currently uses the product or service.  Clearly the Apple Pay is compatible to the existing methods of buying at retail.

Complexity – This principles simple says that if the innovation is complex, hard to use, hard to understand, etc., it has more difficulty in being accepted.  A swipe of the cell phone is no more complex to the consumer  or merchant than the swipe of the credit card.  Apple Pay will not be constrained because of complexity.

Trialability – Can the innovation be tried?  The answer is YES for Apple Pay.  If you have the right phone and you have programmed it properly, you certainly can try it with a merchant who accepts this mode of payment.

Observability – Can you observe if the innovation can make an improvement. If it was a laundry detergent are the whites whiter and the brights brighter?  In the case of Apple Pay, the observability will have to occur in the mind of the user and retailer.

Apple Pay’s only real weakness in the innovation adoption probability scale is “relative advantage.”  Will this doom the new technology?  Don’t bet against Apple.  They have a way of making their innovations highly successful and profitable for all participants.