Apple Pay's October debut was arguably the biggest story in mobile payments in 2014. But it's only the prologue of a larger conflict set to heat up in the year ahead.
Apple Pay's most outspoken rival was the retailer-driven Merchant Customer Exchange's CurrentC wallet, which has already enrolled numerous retailers to exclusively support it. A handful of these merchants demonstrated their commitment by shutting off acceptance of Apple Pay and all other Near Field Communication-based wallets. It was a bold move, especially considering that CurrentC won't formally launch until sometime next year.
But even with the issue of Apple Pay being deliberately shunned by some major retailers, the Cupertino, Calif.-based tech giant's mobile wallet is gaining momentum. An ITG Investment Research report released this week found that Apple Pay customers use the wallet about 1.4 times per week, with a return rate of 66% for future transactions at the same merchant. The research also found that 60% of new Apple Pay customers used the app on multiple days through November.
Even though Apple Pay is the first mobile wallet to enjoy such widespread awareness in such a short time, many merchants are not sold on this new way to handle payments. In particular, Apple has not provided any incentive for shoppers to visit Apple Pay-accepting stores.
"Apple has not done anything to really improve things for the merchant," said Richard Crone, chief executive of San Carlos, Calif.-based payments consulting firm Crone Consulting LLC.
Apple is banking on retailers being swayed by its brand appeal alone, but if anything, Apple Pay's launch has instead motivated merchants, banks and MCX to cut deals for accepting bank-branded mobile wallets, Crone said, citing a UBS report predicting that scenario as a likely aftermath of the debut of Apple Pay.
"This is a very complex chess game with many moves to be made here before we claim checkmate with the consumers for anyone," Crone added. "The folks at MCX have been working for several years and could see this coming, and they know the available options and how to motivate consumers with something Apple Pay will not have."
Apple did not respond to an inquiry about its upcoming plans or goals.
The MCX strategy has remained consistent from day one, even after Apple Pay's launch in the fourth quarter of 2014, said Scott Rankin, chief operating officer for MCX.
MCX has been tracking mobile payment adoption for the past three years, and it has become clear that consumers want an app that does more than just payment, Rankin said.
"Apple Pay today is just about payments we are focused on taking loyalty programs and coupons and digitizing it into a very seamless and easy-to-use app for consumers," Rankin added.
MCX is in a "private launch" right now with some retailers and remains on target for a national rollout of CurrentC in 2015, Rankin said. "All I can tell you is it won't be early in 2015 and it won't be late in 2015," he said.
Generally, consumers can expect multiple payment options to go along with the loyalty and couponing capabilities in a mobile wallet that will adapt to technologies over time in a way will make the payment mechanism "invisible," Rankin added.
Ultimately, there are no guarantees in the high-stakes mobile wallet war.
"To a large extent, the cool stuff about mobile wallets is a big distraction to the industry," said Steve Mott, principal of BetterBuyDesign, a Stamford, Conn.-based consulting firm. "It's the shiny new object on the ground, but it only impacts the payments world as we know it a very little bit."
Under the hood, Apple Pay adds security in the form of EMV, tokenization and biometric authentication, and the wallet's biggest influence may be in spreading the EMVCo tokenization standard, Mott said. "That is going to affect every single player in the payments industry."
Similarly, Apple Pay has created the "means to facilitate a sea change in the industry, but as of right now, it looks like it will just tighten the grip that MasterCard and Visa have," Mott added.
When MCX makes its CurrentC system widely available, it will represent a more collaborative effort, Mott said.
In the meantime, Apple is not idly standing by to see what happens next.
Apple recently added PayPal as a payment option for its online store, a possible first step toward mending the companies' relationship and making PayPal a funding option for the Apple Pay wallet.
Apple and e-commerce giant Alibaba have openly discussed some kind of collaboration as well. Apple is also beginning the process of expanding its wallet to Europe, and recent reports indicate it is encountering at least a little friction in its efforts to bring its terms to the U.K.
And Walt Disney World, which has long accepted only its own closed-loop contactless cards and MagicBand bracelets, began accepting Apple Pay and other NFC payment options this month.
But the clearest move Apple has signaled is wearable payments. The upcoming Apple Watch will support Apple Pay through a built-in NFC chip, which most Android Wear smartwatches lack.
The fact that CurrentC has taken so long to develop gives Apple plenty of opportunity to further its lead.
"Right now, is MCX anything other than a good idea?" asked Brian Riley, senior research director and analyst with Boston-based CEB TowerGroup.
On paper, the MCX wallet makes sense, but it involves merchants who may or may not want to stay on board when the final product rolls out, Riley said.
"A retailer that is cash-starved right now, like Radio Shack, has to think twice about whether this is really the solution that will save them," Riley added. "Whereas for a company like Target, which wants multiple payment options, it's a great idea."
2015 will answer many questions about which mobile wallets will survive the coming war, Riley said. "It won't be all of them."