The Apple Watch supports Apple Pay, but it's unlikely that the smartwatch, coming April 24, will significantly boost the number of mobile payments made by U.S. customers.
"Apple Watch will mostly overlap with the same people" using Apple Pay on iPhones, said Leon Majors, senior vice president of Phoenix Marketing International, which offers research to financial institutions supporting various mobile payment systems.
"As unique new users, Apple Watch doesn't add significantly to the use of Apple Pay," Majors said in an interview on Wednesday.
Gartner analyst Avivah Litan agreed. "I don't believe Apple Watch will change much. It will likely just add a 5% lift to the Apple Pay adoption numbers."
Both Majors and Litan reiterated a long-held view that U.S. adoption of Apple Pay and other mobile payment services will take years to become mainstream. They believe this despite Apple CEO Tim Cook's heavily promoting Apple Pay, saying that 700,000 store locations will accept the mobile payments via NFC-read at point-of-sale terminals.
"This is just round one of a four- or five-round fight," Majors said.
Litan said mobile payments will be a "long-evolving, multi-year rollout." Apple is getting more retailers to support Apple Pay with NFC-ready terminals, but Apple still only has the service on a fraction of the 12 million terminals in the U.S.
"Since NFC mobile payment acceptance is limited and far from ubiquitous, consumers may lose interest in it," Litan added. "The novelty factor will wear off, and consumers will likely find it more convenient to whip out their plastic card, which they know will always work."
Phoenix this week released results of a survey showing that there's interest in using Apple Pay, but prospective users are having difficulty finding stores that will accept it. Phoenix surveyed 3,002 credit-card holders, of which 302 used Apple Pay to make at least one purchase in the past four months.
Of those Apple Pay users in the survey, 47% said they went to a merchant that was supposed to accept Apple Pay only to find that it was not accepted in that particular store. In another finding, 48% used Apple Pay only once for a payment. "There's a worry people will try it once and won't come back," Majors said.
Apple needs to offer a listing of actual stores, not just chains, that accept Apple Pay, Majors said. What often happens is that clerks are not trained to accept Apple Pay or a particular store isn't yet offering the service.
"It's costing them transactions now and some user friction," Majors said. Even at stores that said they could accept Apple Pay, two-thirds of Apple Pay users in the survey said they encountered problems, including that the terminal took too long to record a transaction or that the transaction was posted incorrectly or was double counted.
Even though there are specific problems for Apple to face in improving Apple Pay adoption, Majors said bankers and merchants have failed to make it clear why customers should move to smart cards or mobile devices to make their payments.
While there are problems with Apple Pay, Phoenix calculated the user base of Apple Pay at 12 million individuals. Some industry officials believe that having the mobile payment capability on the Apple Watch will expand the popularity of Apple Pay significantly.
There is also some industry excitement around NFC and magnetic payments capability with the new Galaxy S6 and S6 Edge smartphones from Samsung. Many experts are also waiting to see what the impact will be from the coming CurrentC system from MCX retailers.
"I think smartwatches are going to help mobile payments grow, which will be especially true when the watch is eventually decoupled from the smartphone — and that's inevitable," said Joe Dalton, chief products officer at SmartFocus. His company makes proximity marketing technology to help retailers find shoppers with smartwatches or smartphones near a brick-and-mortar store and then provide a special offer to entice them into the store.
"With Apple Watch, there will be the convenience of Apple Pay and the proximity function that goes with it," he said. "I'm bullish on what watches can do and believe it's the next evolution of the smartphone."