2+ years after launch, with great fanfare and greater expectations – Apple wallet has proven to be a complete dud.

I was part of the select team at MasterCard working on ApplePay in those days, when we all worked feverishly on the platform underpinning Apple wallet. It was the Game Changer – a very popular smartphone platform with half-a-billion+ devoted users that would ‘seed the market’ at scale, secure digital payments (the MDES platform underlying ApplePay was a full-service digital payments platform, offering much more than tokenization), and most importantly, solve the 2-sided market conundrum by enabling hundreds of millions of handsets for secure digital payments in a couple of years after launch.

Yet, here we are – after couple of years post launch, I did not even bother setting up ApplePay on my latest iPhone (this despite being one of the core team that worked hard on the launch!)

The initial excitement

It was not supposed to be like this!

The initial excitement was palpable, and supported the hypothesis going in. In the first week of launch, more than a million users activated and used ApplePay! By the 1 year mark, more than 500 banks had signed up with ApplePay and ApplePay accounted for 1% of US retail transactions. Given it took ecommerce 10 years to reach 10% mark, that was not a bad start at all.

2 years later, the number has actually dropped! For one of the most advertised consumer payment launch in history, with all major banks (and many retailers) spending billions to advertise their participation in Apple Pay, that’s one huge reversal.

Part of the problem was Apple’s own creation. Asking for a share in interchange before the product got established smelled of rent-collection, and did not endear them to either banks or retailers. When the time came later to seek the help of banks and retailers to tweak the product, the help was not (unsurprisingly) forthcoming.

However, to be fair to Apple, that was not the main reason for eventual failure of ApplePay. Even if they had worked along with the banks and retailers to drive adoption, they would have failed. Remember, other wallets – ConnectC, Softcard, Square, ChasePay, CapOne, Google Wallet, Samsung Pay, Android Pay, the list-goes-on – never ignited.

It didn’t work because it will not work. It was never supposed to work. Its really that simple.

It’s the friction, stupid.

CONSUMER PLATFORM CONTEXT _________________________________________________________

Speed Browser Product/Service

Convinience/Utility In-App/Open APIs Omni/Cross Channel

Invisible/Friction-less Bots Ecosystem





To make sense of all this, I have created a framework to track the evolution of Digital Payments and Commerce. Digital Payments and Commerce is being propelled by 3 drivers, each with their own set of imperatives that are changing with time:

Consumer driver for digital payments and commerce has evolved – from speed of transaction (one-click payment, etc.), to higher convenience/utility (combining payments with loyalty, etc.), to invisible/automatic/friction-less payment (think Uber – where you never make a payment at all).

The underlying technology driver for these payments – I would call then run-time / platform – has evolved too. From browser (basically, eCommerce), to the current run-time on apps and apis (basically mCommerce), to the emerging run-time of AI/ML/bots (think Alexa), each has led to a new paradigm in digital payments and commerce. A new way to interact with digital goods and/or digital representation of physical good, to shop, and to buy.

Finally, the scope of Digital Payments and Commerce has steadily expanded, from a product or a service, to 1-on-1 marketing/omni-channel, to a true ecosystem play, leveraging data to drive demand-side network effect.

Each new evolution of the paradigm led to richer UI, more data, better identification and authentication, and most importantly, a new business model. And all these impacted how one would pay.

What is particularly interesting to note is that success in one evolution level does not automatically translate to success in the next level of evolution.

Paypal is a classic example – Paypal wallet solved the needs of the market in the first phase of evolution – providing speed of payment transaction, on a browser platform, and offered as a product/service. When they tried ‘migrating’ their solution to second generation, it failed to ignite – they were still providing a product/solution in a smartphone world while the consumer needs had already changed (utility – Loyalty+Payment). Meanwhile, the context of payment had changed to 1-on-1 marketing, across all channels. Google wallet also made similar mistake, and failed to ignite.

Apple wallet had the best cards in this game – a hardware platform that could serve as wallet, and as a POS, 500 million upper-income consumer base, and most importantly, siri. Had they properly understood the needs of the 3rd evolution and focused on creating the eco-system for merchants, while driving invisible payments for consumers thru Siri as the interface (powered by AI), they would have truly owned this space

Instead, they focused on combining Speed as the consumer driver, with APIs/in-App payment as the technology platform, offered as a product/service. The product design simply did not address the needs of the evolved market they (ironically) themselves had created!

Interesting, Amazon got it right every time - starting with Amazon wallet (1-click payment) and now, Amazon Go shopping!

Lesson for the Banks

As I often tell the Chief Digital Officers of banks – I got good news and bad news for you. Bad news – you guys lost the wallet war. Good news – it does not matter!

Banks should not focus on adapting and modifying digital tools to fit existing process – taking out a wallet, selecting a card, and then making a payment – aka digital wallet. Digital wallets is a digital solution, looking for a digital problem to solve.

Rather, banks should focus on removing technology constrains embedded in their technology platform, open up their platforms and allow large pool of 3rd party developers and start-ups to create new solutions, using bank’s data, banks products and banks’ services.

Innovations is a game of numbers. Push innovation to the edge and let innovators figure out how to add value to consumers and merchants. And if past is prologue, they’ll do what they’ve always done – create use cases that solve the real problems that merchants have in getting consumers to want to shop in physical stores.

It’s a partnership made in heaven. Banks have data, consumer money and by-and-large consumer trust to handle that money. They have also figured out how to live with regulations. Tech Innovators – small startups as well as tech giants – are faster at innovation (tech giants have built up huge AI-based platforms) but lack detailed financial data, and expertise in dealing with financial regulations. If ecosystem is the way to go forward, the kingdom awaits the first bank and tech firm that figure this one out.