Apple Pay 1 Year Later: Boom or Bust?

It's been a year since CEO Tim Cook proclaimed 2015 "the year of Apple Pay." As with most things Apple, the initial hype was through the roof. Most pundits agree that the initial rush of iFans to load Pay onto their iPhone 6 and later models was impressive, and it appeared to be on its way.

Now with a year under its belt, how has Apple Pay fared? According to a recent yearlong study, Apple Pay adoption and usage has been spotty, trending upward in some quarters, and reversing course in others. Good, bad, or indifferent, it appears Pay has positioned Apple on the precipice of what many believe is an industry ready to skyrocket. But if Apple wants to assume and maintain a leadership position, it has some work to do.

Survey saysOnline payments industry specialist partnered with research firm InfoScout after Pay was introduced to track adoption and usage. The report posted in late October speaks to the ups and downs Apple Pay has experienced in the past year. One positive trend was the percentage increase in the number of iPhone users who have at least tried the Pay feature.

In the three months ended this past October, 16.6% of eligible iPhone owners said they've at least tried Pay. That's up from June's 13.3%, which was down from 15.1% in March. The ups and downs in adoption rates are also seen in the usage of Pay. Just shy of 95% of the respondents opted to skip using Apple Pay when it was an option. The survey said the two primary reasons for not paying with Apple Pay were the person forgot it was an option or didn't know the store would take the payment.

Perhaps the biggest concern, and opportunity, for Apple, as well as mobile-payment competitor Samsung , is why Pay wasn't used. When asked, a full 70% of consumers with Pay as a viable payment alternative either forgot, didn't know if the store they were in accepted it, or "didn't have their iPhone 6" with them at the time. That's not good, particularly as this is the "year of Apple Pay."

For those who like and have used Pay, 40% said they whip out their iPhone when they remember to. In other words, even a large portion of Pay fans forget it's an alternative. Yes, that's a problem, but getting Pay to become top-of-mind for users and working with its retail partners to better advertise that "Apple Pay is accepted here" don't seem to be overly difficult obstacles to overcome. And there are billions of reasons for Apple, Samsung, and other pay alternatives to go all in.

What's at stake According to eMarketer, U.S. "proximity mobile payment transactions" will reach nearly $9 billion this year, and more than triple to $27.05 billion in 2016. By 2019, as per the industry estimate, mobile devices will account for a whopping $210.45 billion worth of transactions.

It's no wonder Samsung has entered the fray, and its Pay alternative could be a legitimate competitor, given that it will, as Samsung says, "work with almost any card terminal from day one." Samsung Pay's instant availability at most retailers, not to mention its volume leadership position in smartphones, could get around one of Apple Pay's biggest hurdles: asking users to determine which stores accept it and which don't.

With so much at stake, rumors that Apple is considering the introduction of peer-to-peer payments -- which will probably be a money-losing proposition --may help address its problems with user "forgetfulness." The line of reasoning is that even if Apple takes a hit by offering a payment alternative for person-to-person transactions, the increased usage of Apple Pay would boost its retail efforts as consumers become more comfortable transacting with their mobile device.

So, how did Apple Pay fare in its first year? It certainly wasn't a bust, but the data indicate that for now at least, it didn't exactly knock it out of the ballpark, either. That said, the mobile payment market appears to be on the cusp of exploding, and Apple Pay has a sound, if not spectacular, basis from which to grow.

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Tim Brugger has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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