Apple Has Turned Your Phone Into a Credit Card

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IMAGE DISTRIBUTED FOR MASTERCARD - A customer makes a purchase with a MasterCard using Apple Pay on the iPhone 6 at Walgreens in Times Square, Monday, Oct. 20, 2014, in New York. The service launched Monday. (John Minchillo/AP Images for MasterCard)
Photo: John Minchillo/AP/Corbis

One morning this weekend, I bought a cup of coffee, swiped a credit card, and a minute later left the store. Later that day, I bought a cup of coffee, offered a $5 bill, received my change, and took off, drink in hand. This morning, I bought some coffee, tapped my iPhone to pay, and walked out seconds after. 

All three transactions were quick and intuitive. But technology, financial, and retail firms worth trillions of dollars are desperate to get you to take that third, less-familiar route. They call it the “mobile wallet,” and in this instance, the product in question is Apple Pay, unveiled by the technology giant this month.

With all mobile wallet products, the general idea is the same: Your smartphone becomes your credit card. You tap it on a reader to pay in a store, and it transmits your payment information using a technology called near-field communication. The sales pitch is that such new payment systems are a life-hack and a time-saver. “Paying in stores or within apps has never been easier,” Apple says. “Gone are the days of searching for your wallet. The wasted moments finding the right card. Now payments happen with a single touch.”

But the slick new payment option — now accepted at McDonald’s, Subway, Macy’s, Whole Foods, and a number of other stores — raises the same old questions that Google Wallet and Softcard did before it. How often do you bang your head against the wall because it took too long to remove your wallet from your pocket? How hard is it to hand over a tenner? Do you struggle to find the right card? Is a single touch really better than a quick swipe?

The general response from consumers to those questions thus far has been a shrug. You’re used to paying with cash or credit. It’s easy and reliable. Sure, it might be nice to carry around nothing but a phone. But who does that, anyway? When leaving the house, I generally like to have any number of things with me: keys, hair ties, headphones, sunglasses, business cards, notebook, pens, driver’s license, gum, dog treats. That means carrying a bag. Why not toss my wallet in there, too?

What’s more, right now, using a mobile wallet introduces an element of uncertainty to your checkout. Every store that I visit regularly accepts cash and credit. Not all of them accept mobile payments. If they do, many of their cashiers remain unfamiliar with the process, given its novelty. And don’t even try to use these systems at small or independent businesses. 

Given all that bother, plus the annoyance of setting Apple Pay up in the first place, why pull out a smartphone when you can rely on your trusty, old debit or credit card?

Big businesses get that shrugging inertia and network effects are working against them, but they remain motivated to get you to pay with your phone. Name a major business sector interested in retail or payments, and you’ll find it already competing in this space. That includes consumer-goods stores (who want to collect your spending data and reduce the fees that credit-card companies charge them for processing transactions); credit-card companies (who want to remain at the heart of payments processing and maintain the fee structure); telecom giants, including Verizon, T-Mobile, and AT&T (who want to be big players in mobile commerce); and tech companies, including Apple and Google (who want to expand their iPhone and Android markets, among other goals).

So, how to get us to give up plastic? Their argument right now centers awkwardly and unconvincingly on convenience. The pitches are a solution to a problem that nobody really has. But ultimately, it might center more squarely on deals. Verizon, T-Mobile, and AT&T recently launched Softcard — alas, initially known as Isis — which lets you store your loyalty cards and get specialty rewards when you pay with your phone. Google has its Wallet product, which also keeps up with loyalty programs and gift cards. And retailers, among them Walmart, are developing a product called CurrentC that would do much the same.

Imagine walking by your local coffee shop in the near future and getting a ping that they have a new Pumpkin Spice Latte on offer. Would you like a dollar off or a free scone to go with it, if you come in? That’s an offer a business can make on a smartphone but not a credit card, and it is the future they are hoping to build. Apple has actually lagged its competitors on that front, though it looks likely to launch a rewards tie-in soon.

But for now, even with Apple Pay, it remains the case that the upside is much more prevalent for businesses than consumers. That means I will probably just keep on going through the laborious process of grabbing my wallet, removing my card, and swiping, rather than grabbing my smartphone and tapping it, for now.