By Tripp Mickle
Apple Inc. is nagging iPhone users to enroll in its
mobile-payment service with a persistent red circle badge. The
strategy has worked with some, but is irritating others who say it
is heavy-handed and exploits the tech giant's clout in ways that
could disadvantage rivals.
The tactic, part of the iPhone's latest operating software
launched last fall, is subtle. Users who opt not to input
credit-card information for Apple Pay when setting up their phones
now constantly see the red circle over their settings icon,
indicating their setup is incomplete. Some users also periodically
get notification reminders that go away only once they start the
enrollment process.
Apple Pay allows users to upload credit or debit cards to an
iPhone and securely pay at stores by holding the device above a
contactless terminal. Apple makes money by charging banks a slice
of each transaction through the mobile-payment service, which it
said in 2014 would make cash and physical credit cards
obsolete.
Though payment analysts say the service speeds up checkout times
and is more secure than traditional cards, Apple Pay has struggled
to earn broad adoption in the U.S. Many remain skeptical that it is
more secure, including Jack Frederick, a 29-year-old professional
comedian from Queens, N.Y., who prefers using his credit card
directly.
"This is the most aggressive they've ever been," said Mr.
Frederick, who has had a red badge over his iPhone settings since
updating his software in mid-January. He said the notification has
made him consider trading his iPhone 6 for a Google Pixel. "All
that from one dot," he said.
The Apple Pay push reflects how tech titans increasingly are
using their own devices, software or data to promote their
businesses, sometimes at the cost of smaller rivals. Amazon.com
Inc. sometimes steers Alexa shoppers to its own brands, and
Alphabet Inc.'s Google has been accused of blocking rivals' ads on
its Chrome browser. Amazon said customers can always ask for
specific brands. Google denied having undue influence over
ad-blocking rules.
"Everyone is doing essentially the same trick," said Roger Kay,
an analyst with Endpoint Technologies Associates. "It's really
antitrust behavior."
Mr. Kay compared Apple Pay setup badges and notifications to
Microsoft Corp. bundling its Internet Explorer browser with Windows
in the 1990s -- a strategy the Justice Department successfully sued
to stop on antitrust grounds saying it hurt rivals. "They used to
have actual behavioral remedies and say you can't do this," Mr. Kay
said.
Apple declined to comment on potential antitrust concerns. The
Justice Department didn't immediately respond to a request for
comment.
This marks one of the first times Apple has used a red-badge
notification to push one of its services that generates revenue.
The badges are effective at driving users to take action because
people know the red circle means something needs attention, said
Bruce Tognazzini, a principal with Nielsen Norman Group, a
user-experience consulting firm.
"The real problem is there's no differentiation between, 'We
want to bring your attention to it because it's vital,' and
something like this that for some people it's vital and others it's
not," said Mr. Tognazzini.
Apple's own guidelines, posted online for some devices, advise
developers to minimize badges and only use it to "present brief,
essential information and atypical content changes."
The tech giant is trying to accelerate the growth of its
services business, which includes Apple Pay, its music-streaming
service and App Store sales. Its goal is for the $29 billion
business to generate more than $40 billion in revenue by fiscal
2020. The company is leaning on that business to offset stagnating
smartphone shipments, which account for two-thirds of revenue.
Early estimates indicate Apple's software change has helped
boost Apple Pay enrollment. After launching iOS 11 in September,
Apple Pay was enrolling more than two million users weekly for a
month -- more than double the roughly 750,000 it previously added
weekly, according to Loup Ventures, a venture-capital firm
specializing in tech research. The pace has since slowed to 1.5
million new enrollments a week.
An estimated 34% of new iPhone owners link a card to Apple Pay
during setup and 18% have used it in the past 90 days, according to
451 Research, a technology research firm. Alphabet Inc.'s Google
Pay, formerly known as Android Pay, and Samsung Electronics Co.'s
Samsung Pay don't use the same tactics as Apple and about 8% of
users have used those services in the past 90 days, said 451
Research.
PayPal Holdings Inc., Square Inc., and Zelle, a service created
by U.S. banks, are among the companies and apps competing against
Apple in mobile payments.
Brian Roemmele, founder of the Pay Finders app that maps Apple
Pay retail acceptance, said those companies stand to lose as Apple
becomes more aggressive. "They're going to have to move someone
else aside," he said.
PayPal and Square, which have partnerships with Apple, said they
support efforts to encourage people to adopt mobile payments. Zelle
declined to comment.
At Apple's annual shareholder meeting in February, Chief
Executive Tim Cook said mobile payments have taken off slower than
he expected. Some consumers remain wary of potential security risks
and others are uncertain about where Apple Pay is accepted.
However, Mr. Cook said he hopes he will "be alive to see the
elimination of money."
--Peter Rudegeair contributed to this article.
(END) Dow Jones Newswires
April 03, 2018 07:14 ET (11:14 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
Apple (NASDAQ:AAPL)
Historical Stock Chart
From Aug 2024 to Sep 2024
Apple (NASDAQ:AAPL)
Historical Stock Chart
From Sep 2023 to Sep 2024