Back in 2014, while most of us were still swiping our credit cards or rifling through our wallets for cash, Apple was plotting to take over digital payments.
“From the outset, we envisioned a world where you could use your iPhone to seamlessly pay for everything—from groceries to train tickets, in person and online, across the globe—all while keeping your personal and financial information safe and private,” Jennifer Bailey, Apple’s VP of Apple Pay and Apple Wallet, wrote in a blog post in 2024.
In retrospect, Apple’s sweeping vision seems justified. The iPhone-based digital wallet is now available in 84 markets and through 11,000 banks, and penetration has grown from 3% of US retailers accepting Apple Pay to 85% in just over a decade.
That is a “lightning speed” transition in the world of payments, Christopher Uriarte, payment expert at Glenbrook Partners, told Retail Brew. But it didn’t happen by accident. The explosive growth of Apple Pay was made possible by a combination of well-timed technological innovation, changing regulations, and clear incentives for consumers, banks, and merchants.
No more swiping: Giving Apple Pay momentum early on was a separate but related change in the country’s payment infrastructure. In 2015, Europay, Mastercard, and Visa issued a new standard mandating the adoption of EMV chips, the gold squares on your credit card that look like little circuit boards that allow you to tap rather than swipe.
The significance for Apply Pay was that when merchants started updating their POS systems to communicate with these new chips, many saw an opportunity to add another technological capability called near field communication (NFC). This technology is what mobile devices use to communicate with each other and it also happens to be the backbone of Apple Pay.
“Once they looked at these strategies for replacing their terminals, that’s when they said, ‘Well, listen, it doesn’t really cost that much to add this NFC technology as well,’” Uriarte said.
Once that technology was embedded, he added, your iPhone was as good as your credit card. There was no additional work required of merchants.
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Pitching to banks: But even with the winds of technological change blowing in its favor, Apple Pay still had to get banks on board, and in typical fashion for the tech giant, it came out of the gate with backing from some of the biggest financial institutions in the world. At its launch, Apple Pay was partnered with banks such as Capital One, Chase, Citi, Wells Fargo, and Bank of America, which together represented 83% of credit card purchase volume in the US.
Where Apple was particularly bold though, according to Uriarte, was in going to banks and asking them to pay for the service per transaction. “That’s still the prevailing model in the US today,” he said.
The way Apple justified this model is by offering better fraud protection than credit cards. It offered stronger know your customer (KYC) checks to sign up, and the built-in benefit of every iPhone requiring biometric authentication to process a transaction, Uriarte explained.
“It very much has paid out positively for the banks,” he said. “There is very, very little fraud when it comes to Apple Pay transactions.”
Getting consumers on board: In addition, wide adoption among consumers soon made it hard for any remaining banks to wait on the sidelines. “What eventually happened was the banks that didn’t want to support Apple Pay didn’t want to be that bank that was known for not supporting Apple Pay,” Uriarte said.
And for consumers, the appeal came down to convenience. Apple commissioned a survey from Morning Consult, which found that 90% of users cited “ease of use” for why they adopted Apple Pay; 88% said “the privacy it provides”; and 87% “cited the security of the service.”
“There’s really only two ways that you can get customers to change their behavior and how they pay,” Uriarte said. “The first is they have to have some sort of big financial incentive, or there needs to be sort of a big uplift in convenience, one or the other.”
This is one of the stories of our Quarter Century Project, which highlights the various ways industry has changed over the last 25 years. Check back each month for new pieces in this series and explore our timeline featuring the ongoing series.
