Apple Pay may be a fun way to buy things in some stores, but it won't take off until Apple wins over more merchants.
And there's one big technology problem that could stand in the way, according to a new analyst note from UBS — Apple Pay doesn't let merchants "push" deals to people's phones when they're in or near a store.
Mobile payments expert Richard Crone talked to UBS about Apple Pay's hurdles.
He told UBS that the market for retailer marketing and actionable offers is around $120 billion. The market for using products like Apple Pay in the checkout line is much smaller at around $8 billion.
Apple Pay's technology is holding it back from getting at that bigger market, wrote UBS analyst Steven Milunovich, citing Crone:
Merchants care about loyalty offers, but Apple Pay is one way, based on ISO 14443. Crone says this is 12-year old technology that only allows a token to be pushed. More advanced ISO 18092 support is required for two-way send and receive capability supporting net settlement of ads and offers.
Without access to this huge marketing opportunity, retailers will be less motivated to adopt Apple Pay, especially if it means shelling out extra cash to upgrade their point of sale terminals.
Crone also compared the current state of in-store payments to online banking in the 1990s, noting that banks initially jumped on board with third parties like Intuit, AOL, and Microsoft, before abandoning them and creating their own platforms. He's bullish on MCX, a mobile-payments group created by merchants such as Wal-Mart and Best Buy.
