Apple Moves Cautiously With Pay, So Don't Expect a Big-Data Play

Company Says It Will Not Be Collecting -- or Sharing -- Purchase Details

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Apple's Eddy Cue on Tuesday.
Apple's Eddy Cue on Tuesday.

Apple wants to claim more space in your pocket and on your wrist. Oh, and it's coming for your wallet, too.

On Tuesday, CEO Tim Cook introduced Apple Pay, a payment system that ships aboard the two new, larger iPhones the company rolled out. Users can make transactions with one tap, using Apple's Touch ID fingerprint sensor and new near-field communication, a technology the company is adopting for the first time. Apple Pay will also work on Apple Watch, the wearable device the company is selling starting in 2015.

For the digital wallet, Apple is partnering with financial giants Visa, MasterCard and American Express, eleven banks and multiple retail partners. All told, it should work with contactless payment systems at over 220,000 merchants in the U.S., according to the company.

But marketers hoping for some treasure-trove of data shouldn't be euphoric. Details on Apple Pay remain sketchy. It does not track purchasing data -- and, if it did, Apple isn't likely to be eager to share.

Apple Senior VP Eddy Cue said during Tuesday's presentation that Apple will not be collecting information on what people purchase using Apple Pay, where they bought it or how much they spent. "The transaction is from you and your bank," he said.

"Advertisers will be disappointed that [purchase data] won't be available in the near future, but to get people to adopt the platform, it's something [Apple] had to do. I don't think they really had a choice on that," said Rachel Pasqua, head of mobility at MEC Global.

"It's elegant, but conservative," said David Hewitt, VP of the agency SapientNitro, said of Apple Pay. The company, he said, is aiming for broad adaptation before integrating the offering with apps, services and advertising. "It's that type of mentality that's going to change consumer behavior," Mr. Hewitt added.

And with last year's data breach from Target, a more recent breach involving Home Depot and the recent celebrity-photo scandal implicating Apple's iCloud, going conservative was likely a wise choice.

"There is always plenty of time to make more of that special data available for targeting later on. You can always add more data in later … but you can't repair a trust breach as easily," said 360i President Jared Belsky in an email.

Apple has long been poised to jump-start mobile payments, which have lagged in the U.S.. It has 42.4% of the smartphone market, and over 800 million credit cards on file with iTunes.

Apple users can upload credit-card payment info from their iTunes Store account into the new iPhone 6 as well as iPhone 5 models, the company said. When the new iPhones arrive later this month, owners can deploy Apple Pay at a variety of businesses, including McDonald's, Bloomingdale's, Staples, Subway, the Disney Store and all 258 of Apple's retail outlets. In addition, multiple brands were tapped to work with the mobile wallet through mobile apps, including Uber, Groupon and Target.

"Payments is a huge business," Mr. Cook said on stage. A short video followed, in which a woman flubbed a credit-card transaction. Mr. Cook called the cards "outdated," with a "vulnerable magnetic stripe interface." He added, "It's no wonder people have dreamed of replacing these."

Others have tried to before. Google introduced its mobile wallet in 2011, but it has seen little consumer traction. Neither did Softcard (formerly Isis Wallet), which had the backing of wireless carriers. In 2013, 11.2 million mobile users, representing just 8% of smartphone owners, made a proximity payment, according to eMarketer.

"If anyone can pull off mobile payments, it's going to be Apple," said Phuc Truong, managing director for Mobext, who previously worked in mobile payments. Still, manging retail and financial ties remains a hurdle, as is spurring consumer interest. "It's not all roses," he said.

Apple Pay sits in Passbook, the app Apple introduced in 2012 and pre-installs on all iPhones.

"Marketers started to salivate the second Passbook came out," Mr. Hewitt said. Its imagined capacity -- to push discounts and offerings through location-tracking services -- never panned out. "Apple's wallet is going to pose the same challenge to marketers," he said.

But Ms. Pasqua said the addition of Apple Pay might change matters if retailers adopt Apple Pay's register system, which could make redeeming Passbook-stored offers more seamless. Checkout systems "are a lot more mature than when Passbook rolled out," she said.

"I think you're going to see a lot more ads on smartphones and tablets that enable you to instantly redeem and instantly save coupons and loyalty offers to Passbook," she added.

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