Apple Pay has launched to much fanfare. People with the iPhone 6 or 6 Plus are now able to make credit card payments at certain shops and restaurants in the US. But Apple Pay isn’t the first of its kind and the technology it uses has actually been around for the past 15 years. So why has it taken so long to enter the mainstream?
My colleague Filipe Santos, professor of entrepreneurship at INSEAD and I studied the market in North America, Europe and Asia between June 2006 and June 2011, conducting 65 interviews with 40 informants. We found that, if it wasn’t for the egos of the different companies involved in making mobile payments systems work, it would already be a lot more widespread.
Clash of the Titans
The mobile payment industry is a perfect example of titans from different industries clashing over how to deliver a new concept. It is often the case that firms from distinct industries struggle to reach an agreement when launching a new market. This is due to their history of dominance in their own industry and lack of joint collaboration experience.
So, in the case of mobile payments, you had the giants of the banking industry on the one hand and the network operators on the other. Their inability to reach an agreement led to a weak compromise on how the mobile market would function, with many unresolved issues in how it would be managed.
This creates a vicious cycle where other players hold off investments in the necessary market infrastructure: implementing point of sale devices, rolling out payment technology enabled phones. When the infrastructure falls behind, the disagreeing parties in turn lose any incentive to work on an agreement because the market is not taking off. The result: despite the mobile payments technology being readily available since 2000 and despite the strong demand for it, the market has been incredibly slow to materialise.
