Apple Faces Several Hurdles in Making Mobile Payment a Success

SAN DIEGO, CALIF. (TheStreet) -- With Apple  (AAPL) just weeks away from entering the mobile payments market with Apple Pay, experts remain on the fence as to whether the brand can do what others can't: convince consumers to pay with their smartphones. If Apple is lucky, it'll achieve, match or exceed the success enjoyed by Starbucks (SBUX) , which has enticed millions of its coffee-drinking customers to pay for items in its stores with a mobile transaction.

Starbucks' barcode-scanning solution, introduced in 2011, is by far the only system to have made measurable inroads with consumers. The coffee chain dangles perks and reduced waiting times in line to prompt customers to use its mobile app for store purchases. Currently, Starbucks processes more than 6 million mobile pay transactions per week in the U.S., with mobile pay accounting for 15% of those transactions, CEO Howard Schultz told investors during a recent earnings call. 

Except for this singular case study, "it's really hard for us to get good, credible data because [mobile payments] is just so small," James Wester, Research Director of Global payments at IDC Financial Insights, told TheStreet.

Read More: Why Apple Pay Is So Important to Apple's Future

Companies ranging from startups like LevelUp, to corporate entities such as Google (GOOG) , and even large consortiums as Merchant Customer Exchange and Softcard, have developed various technologies and apps for smartphone payments at the point of sale. But to little avail.


Only 10% of smartphone users, or 15.9 million people, will pay with their device in the U.S. this year, according to eMarketer, which counts all proximity payments made at the point of sale. And while eMarketer projects that figure will rise to 27%, or 57 million, by 2018, the number of people using it now is small, suggesting that this behavior remains unnatural or is unavailable to most shoppers.

"In terms of payment methods, nobody really complained about taking the credit card out of the wallet as an activity that is ... difficult," Brian Blau, Technology and Business Research Director at Gartner, told TheStreet. "There's every reason to believe that payment cards are going to stick around."

Yet, there's no ignoring the fact that when you walk into a Starbucks store, you'll see people of all ages take their iPhone or Android device and scan it at the register. Is it so hard to believe that this behavior could exit the Starbucks store with the consumer, who then heads to Macy's (M)  where Apple Pay is accepted?

"When you look at what Starbucks has done, you can't help but feel that they've caught lightning in a bottle," Wester said. 

The winning recipe? The coffee company has mixed mobile payments with rewards, Starbucks card management, app features, and soon mobile ordering, Starbucks Digital Chief Adam Brotman told TheStreet.

"In a vacuum, payment itself through the phone, while it's convenient, is not the main reason our customers are adopting [mobile pay]," Brotman explained. He added that Starbucks' mobile pay customers tend to be its best customers, spending more overall, returning more frequently, and engaging more with the company.

It's telling that Starbucks, which is adopting Apple Pay at launch, is only doing so as a means to give customers a way to digitally reload their electronic Starbucks cards. The company is not implementing near-field communication (NFC) terminals at its registers. Why mess with the only proven system on the market?

Read More: Apple Pay Is the Latest Reason It Stinks to Be a Traditional Bank

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