Over the next 5-10 years, we believe augmented reality will emerge as the next dominant computing paradigm and that Google and Apple will provide the operating systems that power AR computing. The OS will need to incorporate core technologies including artificial intelligence, maps with points of interest, organized informational data, social data, a developer community, content, and payments. In what follows, we focus specifically on the payments element and report on the state of the union of Apple Pay.

Apple Pay State Of The Union:

• 2,091 banks accept Apple Pay globally, up from 1,439 in July of 2016.
• We estimate about 13% of active iPhones have activated Apple Pay.
• We estimate 30% of new iPhones are activating Apple Pay.
• 53% of retailers listed as “coming soon in browsers” have launched in the first 6 months.
• 31% of retailers in the Internet Retailer 100 accept Apple Pay, up from 28% in Oct.
• 44% of retailers in the Internet Retailer 100 have adopted Apple Pay at point of sale.
• 40% of retailers in the Internet Retailer 100 have adopted Apple Pay in-app.
• 13% of retailers in the Internet Retailer 100 have adopted Apple Pay in mobile browsers.
• 9% of retailers in the Internet Retailer 100 have adopted Apple Pay in desktop browsers.
• 22% of all possible points adoption leverage Apple Pay within the Internet Retailer 100.

Apple Pay adoption trend since Oct, 2016. In March 2017, we counted 31 of the Internet Retail 100 accepted Apple Pay in some form.  In October 2016, while at Piper Jaffray, we counted 28 of the Internet Retail 100 accepted Apple Pay in some form, including point of sale, mobile and desktop (excluding in app).

A better way to measure Apple Pay adoption. We looked at the Internet Retailer top 100 online sites to gauge adoption of Apple Pay. Next, we created an Apple Pay adoption score that looks at current retailer adoption as a percentage of potential adoption. There are 4 ways a retailer can adopt Apple Pay, including point of sale, in app, mobile and desktop browsers. This equates to maximum of 316 Apple Pay adoption points within the Internet Retail 100, considering that only 62 offer point of sale and 54 offer an app. We found 22% Apple Pay adoption in March 2017, or 71 of 316 possible points of adoption. Since this is the first time we have measured the adoption score, we don’t have a comparative score.

Point of sale. Apple Pay has 44% adoption at point of sale within the Internet Retailer 100. 62 of the top 100 online retailers offer point of sale; among them, 27 accept Apple Pay in store. Apple Pay launched at retail and in-app in the fall of 2014. Apple added Apple Pay for mobile and desktop browsers in the fall of 2016. In other words, the company has had over 2 years to build adoption at point of sale. Apple Pay at point of sale works with a broader tap and pay network; most locations that accept Apple Pay also accept other tap and pay offerings including Google Wallet and Samsung Pay. Since this our first measurement, we don’t have a comparative number. Bottom line: adoption of Apple Pay at point of sale is growing nicely, in-line with growth among other digital payment players, including Google and Samsung wallet.

In-app. Apple Pay has 40% adoption in-app within the Internet Retailer 100. We found 22 of the Internet Retailer 100 offer Apple Pay in app, of the 54 that offer apps.

Mobile browser. Apple Pay has 13% adoption in mobile browsers within the Internet Retailer 100. The low adoption rate is to be expected. Apple Pay in mobile browsers started in the fall of 2016 and retailers tend to wait until after the holiday to switch over.

Desktop browser. Apple Pay has 9% adoption in desktop browsers within the Internet Retailer 100. Even though most instances of Apple Pay on the desktop requires an iPhone (not required on MacBook Pro with Touch Bar and Touch ID), the payment step involving the iPhone was painless, adding about 4 seconds to the payment process.

Consumer adoption of Apple Pay. Consumer adoption is the most important and most difficult metric to measure. Based on a data point Apple disclosed in April 2016, we believe that users are activating Apple Pay on about 30% of new iPhones. In total, we estimate that 13% of the 680m iPhones in use today have activated Apple Pay. We do not have any data on usage of Apple Pay by iPhone users. Apple reported that transactions were up “nearly 500% y/y” in the Sept. 2016 quarter.

Tracking the “coming soon” list. In June 2016 Apple announced 73 sites that would soon offer Apple Pay in Safari. Apple Pay in browsers then launched in Sept. 2016. We found that 39 of those 73 sites, or 53%, now lead with Apple Pay. Going a level deeper, there were 146 opportunities to use Apple Pay (mobile and desktop); of those 146 opportunities, 66 lead with Apple Pay and 45 lead with PayPal. Bottom line: after 6 months, just over half of the sites Apple announced have adopted Apple Pay, respectable progress given many retailers would likely wait until after the holidays to shift to Apple Pay.

Scoring the user experience. We also scored Apple Pay’s ease of use in desktop and mobile browsers. We awarded a score of 1 if Apple Pay was accepted, but required the user to log in before seeing the Apple Pay option. We awarded a score of 5 if Apple Pay was available before the checkout cart (e.g., Lululemon). The average mobile ranking was 3.3; the average desktop ranking was 3.0. Bottom line: Apple Pay enjoys slightly better placement on mobile vs desktop.

1. Apple Pay primarily promoted & solely, before checkout
2. Apple Pay primarily promoted at checkout in the cart
3. Apple Pay is number one in the list
4. Apple Pay is below another option
5. Login to account to see Apple Pay