Will Apple Pay Fly in the Travel Industry? – Part I

Glenn Gruber | October 27, 2014 | In the News

While the new iPhones and Apple Watch enjoyed most of the buzz at the recent Flint Center launch event, Apple Pay—launched Monday with the release of iOS 8.1—may end up being the most impactful announcement in the long term.

Numerous media outlets have spent time covering Apple Pay, including Propelics’ own blog. But most of this coverage has been on the mechanics of the technology and on its use in traditional retail environments. But what impact might Apple Pay have in the travel industry?

Before we dive into use-cases and projected impact, let’s first recap what Apple Pay is all about.

The Last, Best Hope for Mobile Wallets

Apple Pay may be our last, best hope for delivering a mobile wallet solution. Many others have tried to crack this nut and failed. Google, for instance, fell flat due to a lack of devices available to support NFC at the time—as well as an inability to get a meeting of the minds with card issuers over control of data. Carriers have tried the same with SoftCard (née ISIS) to little effect because…well, because they’re carriers and can’t market their way out of a paper bag. As a result, they’ve engendered little trust with consumers.

Apple has approached the problem in a uniquely Apple way—with an elegantly simple end-user solution that also places consumer concerns about privacy and security at the forefront.

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It’s an elegant solution, but more of a sustaining innovation, rather than a disruptive one. Though it reduces some friction from the process, it doesn’t change it in any meaningful way— users keep their same payment processors and banks. The status quo of the payment system value chain is largely untouched.

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Nor is it significantly different than Amazon’s 1-click payment, PayPal, or even Apple’s own iTunes purchase methods. But the fact that it can be extended to any app (rather than having to enter card info into every app to make a purchase) and is also for use in physical retail stores is highly valuable.

Don’t get me wrong. Sustaining innovations can still have a really big impact. If successful, the impact on Apple’s bottom line could be huge as the marginal cost of the service is close to zero. Not that Apple—which is famously profitable already—needs any help.

For participating merchants, not only does simplifying the process make the likelihood of conversion that much higher, but unlike prior attempts at mobile wallets, the market dominance of iPhone will mean an excess of 100M devices supporting Apple Pay in 12 months—making this a large scale deployment. This is in stark contrast to the situation Google experienced with its wallet. Only a handful of Android devices that supported NFC could take advantage of the service.

Impact on the Travel Industry

So is the travel industry ready for Apple Pay? And if so, what kind of impact might it have?

A Q1 2014 Atmosphere Research study of more than 5,000 US travelers showed that 1 in 5 leisure travelers and 1 in 3 business travelers currently have mobile wallets on their smartphones. 20% of both leisure and business travelers who don’t have mobile wallets on their phones are interested in getting one. Of smartphone owners, 37% of leisure travelers and 49% of business travelers believe mobile wallets would be helpful when traveling.

Personally, I think those numbers may be inflated by apps pre-loaded on devices, but the numbers do show there is at least a strong interest in mobile wallets by travellers. And that’s good. Though these numbers don’t appear to reflect the reported usage.

Within virtually all sectors of travel, Apple Pay has great potential to help reduce the sales cycle and open up higher conversion rates of high profit ancillary products, especially in combination with location-aware and context-aware applications, making offer presentment more relevant and effective.

Atmosphere Research’s Henry Harteveldt is bullish on the potential of Apple Pay: “Apple has the brand trust and product features that will help. Apple has designed Apple Pay to fulfill the promise of ‘click okay and walk away,’ which will make it a very consumer-friendly tool. Just as Starbucks has seen its mobile app help speed up customer check-out at its cafes, Apple Pay could be used by a hotel guest to check out of a hotel, let an airline passenger pay for ancillary purchases such as upgrades or lounge passes at the airport, and pay for ground transportation or activities.”

American Airlines has often been an early adopter of Apple technologies and is often singled out in keynotes. Phil Easter, Director of Mobile Apps for American, sees many possibilities for Apple Pay. “A lot of people will see this as cool, but when people start to understand the impact, especially with Apple Watch showing up next year, you will see all kinds of new use-cases that consumers will dive into.”

American believes Apple Pay will provide opportunities to promote and convert last minute impulse ancillary products, such as seat upgrades and day passes to lounges.

In this writer’s view, I can also see Apple Pay being used for in-flight purchases, as an extension of the cashless-cabin approach. There are some technical issues—most notably the requirement of in-flight WiFi—along with the logistical issue of having to be a few inches from the flight attendant’s device (challenging from the window seat).

With beacons and proximity and contextual awareness, smart travel marketers get offers to the passenger nearer the time of departure and at moments of need. Apple Pay will make accepting those offers even more convenient.

Adds Easter, “Anytime there’s an opportunity to reduce barriers to entry or use, we have to embrace it. Consumers’ expectations that we provide better and better experiences only get higher and higher. Steve did that to us. He created an environment where elegant apps rule the world. And Apple Pay is another step in that journey.”

In the next installment, we’ll look at the impact of Apple Pay on the hospitality industry and explore expectations for adoption throughout the travel sector.

Glenn Gruber

Glenn Gruber is a Sr. Mobile Strategist at Propelics. He leads enterprise mobile strategy engagements to help companies determine the best way to integrate mobile into their business -- both from a consumer-facing perspective, but also how to leverage mobile to empower employees to be more productive and improve service delivery through the intelligent use of mobile devices and contextual intelligence. Glenn has helped a wide range of enterprises on how to leverage mobile within their business including Bank of Montreal, Dubai Airports, Carnival Cruise Line and Merck. He is a leading voice in the travel sector as a contributing Node to Tnooz where he writes about how mobile and other emerging technologies are impacting the travel sector and a frequent speaker at industry events.

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