Nearly one year after its debut, Apple Pay could see a boost in usership with the addition of Starbucks to the roster of retailers that support Apple’s contactless payment system. Apple Pay is also expected to roll out to two other chains — KFC and Chili’s — starting next year.
Apple executive Jennifer Bailey, the company’s vice president of Internet services, Apple Pay, announced the program’s expansion yesterday at re/Code’s Code/Mobile conference in California.
Launched in the U.S. last October, Apple Pay uses near field communication (NFC) to handle transactions at a number of brick-and-mortar and online retailers. The payment system — which also became available in the U.K. this summer — is supported on Apple’s latest devices, including the iPhone 6 family, the Apple Watch and recent models of the iPad.
New Support for Loyalty Programs
Beginning later this year, an unspecified number of Starbucks stores across the U.S. will begin a pilot program to accept payments via Apple Pay, Bailey said at the Code/Mobile conference. The retailer has committed to bringing the system to all 7,500 of its corporate-owned stores in 2016, she added.
A representative of Apple told us today that Apple Pay would also be coming to KFC and Chili’s outlets across the U.S. next year. In the case of Chili’s, the rollout is expected to start in the spring and eventually extend to all 1,000 or so corporate-owned stores.
Bailey noted that the recent iOS 9 mobile operating system update will now enable Apple Pay users to also add their loyalty cards for participating retailers. That “super-simple” capability will ensure that users can get loyalty-program credit for their purchases, she said.
Once loyalty program data is saved on an Apple device that information will be automatically presented during a transaction. “It can be a single-tap experience,” Bailey said.
The ‘Magic’ Needed: Repeat Use
The expansion of Apple Pay to a retailer with the popularity of Starbucks could give the payment system a much-needed shot in the arm, Greg Weed, director of card research at market research firm Phoenix Marketing International, told us.
Phoenix has been studying adoption rates of Apple Pay since the system was launched last year, and its most recent research indicates that uptake has slowed, Weed said. In February, the percentage of all U.S. payment-card users who had linked a card to Apple Pay stood at 11 percent and rose to 13 percent in July, he said. That percentage is now at 14 percent, according to the latest data.
“[T]he rate of growth is decreasing, statistically,” he said. “The magic of Starbucks is the repeat use.” If Apple can integrate its payment system with Starbucks’ loyal customers — and with the chain’s loyalty program — that could speed up Apple Pay’s slowing adoption rates, he added.
Another challenge will be ironing out the many problems with “friction” that Apple Pay users have reported at checkout, Weed said. Even at retail outlets listed as accepting Apple Pay, customers often report problems with payment due to equipment difficulties, employees unfamiliar with the system or other issues.
If Apple can overcome those issues and make it easy for Apple Pay customers to pay as well as earn loyalty points, the program’s expansion could be “a very good move in terms of solving one of the key problems with repeat use,” he said.
Apple Pay is currently accepted at more than one million locations, according to the most recent information from Apple. The company said it is on track to reach 1.5 million locations by the end of the year.