Tales from Apple Pay's First Partners

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U.S. Bank's Jason Tinurelli described being chosen as one of Apple Pay's few pre-launch partners like he won the golden ticket from Willy Wonka.

And just like Wonka began his chocolate factory tour with a floor-to-ceiling NDA, Tinurelli said Apple was extremely restrictive in its terms. Only 10 people in the bank were allowed to know what the project's goal was, and the other Apple Pay partners were known only by code names.

But even though Apple was running the show pre-launch, U.S. Bank had a daunting task ahead of it once the restrictions lifted and Apple revealed its mobile wallet to the world.

"Here was our opportunity to go with the pretty girl to the prom. We were able to take some of their shine and push it toward ourselves," Tinurelli said, "but I will say there is nothing I can do as a card issuer that is going to make you want to put my card on your phone unless you want to use the card."

Tinurelli, U.S. Bank's senior vice president of retail payment solutions, digital strategy and innovation, joined other Apple Pay partners who shared their stories at SourceMedia's annual Card Forum and Expo, taking place this week in Chicago.

Prior to Apple Pay's launch, marketing was tricky. U.S. Bank had to prepare a marketing plan to cover its entire branch map, but it couldn't inform any of its branch personnel.

"This was probably the first – honestly the first – campaign that we did where the digital team took over every touchpoint in the bank," Tinurelli said. "We reserved branch space months in advance for no particular reason."

Of course, once the marketing campaign went live, branch personnel were eager to play their part. Even four months after Apple Pay's launch, branches have not removed the Apple marketing materials and staffers frequently use Apple Pay as a conversation starter, he said. For example, if a customer has placed his or her iPhone on a branch employee's desk while opening an account, the employee will suggest adding a U.S. Bank card to Apple Pay.

Enrolling a card with Apple Pay creates a unique token to use in place of an account number, and U.S. Bank's digital team was surprised by the number of token deactivations it observed, Tinurelli said. One person loaded and deactivated a U.S. Bank card to Apple Pay 58 times.

"It was a branch banker," Tinurelli said. "There's a lot of showmanship with Apple Pay," and this banker repeatedly enrolled and deactivated the same card to demonstrate the process.

Apple's merchant partners faced a similar dilemma. At Panera Bread, only eight people at the company other than its senior management knew about Apple Pay before its launch, but the merchant had to deploy compatible terminals to every one of its stores.

Marketing presented different challenges for retailers, said Brian Backer, Panera's director of enterprise architecture. Panera had to communicate not only that it accepts Apple Pay (and other Near Field Communication-based mobile wallets, such as Google Wallet), but also how to use it.

"Who has responsibility for the education of the consumer base?" Backer asked. "We know who we'd like it to be, but it seems to be falling on us more and more."

In these early days, Apple provides some materials to promote its own brand and discourage retailers from creating signage that indicates any and all NFC wallet brands are accepted, he said.

Merchants with closed-loop branded cards are annoyed by Apple's process of making the first card enrolled to Apple Pay the default card used with purchases.

“We know that our card likely would not be the default credit card at the top of the Apple Pay wallet,” said Troy Carrothers, senior vice president and general manager of retail payment solutions and digital sales and services for Kohl’s Department Stores.

While Apple Pay users can change their default card for specific purchases, it requires an extra step in the payment process, and Apple does not reorganize the order in which its wallet displays cards.

The process of deploying Apple Pay was less secretive for the companies who began their deployments in the weeks and months following the October 2014 launch of the Apple wallet.

"I didn't get a golden ticket … maybe it wasn't such a bad thing," said James Bell, senior vice president and director of card services at Fifth Third Bank, which deployed Apple Pay in February.

"The great thing about us being a later entrant is the entire bank rallied behind it," he said. The company was able to avoid some of Apple Pay's earlier technological glitches and the fraud that stemmed from other issuers' lax authentication.

Both Tinurelli and Bell urged issuers to use nontraditional challenge questions when authorizing an account to use Apple Pay.

"Don't treat it like a card activation," Bell said. "If you do it like that you're gonna get burned."

Fifth Third benefited from starting some months after Apple Pay's launch partners, but it wasn't willing to wait too long. There was a perception within the bank that it was lagging behind its rivals, and this perception helped the project progress quickly, Bell said.

Both bankers said their Apple Pay adoption trends were in line with the few details other issuers have publicly disclosed. It's the "affluent, active consumer base" that is using Apple Pay the most, Tinurelli said. Because this trend is so consistent across banks, "the consumer is definitely driving this," he said.

The issuers lamented that this means they have little choice but to operate on Apple's terms, including paying a fee to support Apple Pay.

Banco Popular de Puerto Rico, which has yet to deploy Apple Pay, concluded that it could not change consumer behavior simply by endorsing a different mobile wallet.

"The customers, they're not going to switch their phone from an iPhone to an Android just because as an issuer, I don't provide that service," said Fabio Garcia-Passalacqua, senior vice president of the retail lending division at Popular. "I'd rather have not to pay the fee, but it's out there and it's not up for negotiation."

Panera's Backer replied: "The only thing I'd say from a merchant perspective is, welcome to our world."

David Heun contributed reporting to this story.

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