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Who wins, who loses if Apple Pay takes off

Who wins, who loses if Apple Pay takes off

“Did it do it?”

“What happened?”

“Is that the Apple thing?”

So asked three clerks at the downtown Boston Macy’s after I completed authorizing a $29 clothing purchase today with Apple’s (AAPL) wireless Apple Pay service in about two seconds.

It was fun and quick, but the question that really matters is just how many of the millions of people in the United States who bought a new iPhone 6 or 6 Plus will actually use Apple Pay and how often.

Almost all previous mobile payment and mobile wallet offerings have flopped. Just $1.6 billion out of some $4.5 trillion purchases were made via mobile services last year, according to eMarketer, which projects the total mobile purchases to hit a whopping $3.5 billion this year.

One of the only remotely successful mobile payment palns, run by Starbucks (SBUX), has grown to 15% of all transactions thanks to loyal customers who love the brand.

Apple Pay has the possibility to greatly increase mobile payment growth as the company will likely sell tens of millions of new phones with the service pre-loaded. The Apple Pay system is lightening fast and provides significantly better security than an ordinary credit card swipe. Still, there are some hiccups.

At Macy’s today, the check out register still required me to sign for my modest purchase despite the fingerprint-granted authorization from Apple Pay. The chain requires a signature on all third-party credit transactions over $25, a spokesman said. If the clerks had asked to see my credit card to match the signature, that would defeated the whole purpose of Apple Pay. Thankfully, they didn’t.

Later, at a CVS (CVS), I used Apple Pay in the self-check out line even though the pharmacy chain isn't one of Apple's partners. But CVS has installed industry-standard, wireless check out terminals. Because Apple Pay uses Mastercard (MA) standards and technology under the hood, my $1.19 purchase of a pack of SweetTarts went throught just fine. 

Winners and losers

Still, only a limited selection of stores currently accept Apple Pay. If the service the takes off, it could prompt greater traffic to those chains, such as McDonalds (MCD), Panera Bread (PNRA) and Bloomingdale’s in addition to Macy’s.

Many other retailers have chosen not to partner with Apple Pay yet. Some don’t have the right check out registers in place. Others are rejecting it because Apple chose to work so closely with the three big credit issuers, Mastercard, Visa (V) and American Express (AXP) along with their issuer banks.

Major store chains such as WalMart (WMT), Target (TGT) and CVS are backing a competing plan, still in the testing stage, called CurrentC.

Unlike Apple Pay, CurrentC relies on bar code scanning so it works with almost every kind of smart phone in use. What it doesn’t work with is credit cards – customers have link a bank account, gift card or debit card. And stores that sign up for CurrentC must agree not to accept competing mobile payment plans -- at least once it arrives. As seen at CVS today, Apple Pay works even where you might not expect.

The success of Apple Pay at swaying consumers’ shopping choices over the next six to 12 months, before CurrentC arrives, could make or break the big retailers’ dreams of pushing credit card users toward mobile payment apps.

Should Apple Pay win over consumers, it would also be a big win for Visa, MasterCard and Amex since the service would prop up the status quo -- not disrupt the credit card industry as some fear. Retailers still have to pay all the same fees to the card networks, processors and banks they complain about now.

Other big winners could be players in the wireless chip industry. Apple Pay relies on wireless signals sent by a Near Field Communication, or NFC, chip and the new iPhones contain chips from NXP Semiconductors (NXPI) and Austrian supplier AMS.

Makers of check out registers with NFC chip readers, such as VeriFone Systems (PAY) and French manufacturer Ingenico, would also benefit in that scenario. However, retailers are already ramping up purchases to meet requirements for EMV-compatible terminals, so the increase may not be as significant.

PayPal, the soon-to-be-spun-off unit of eBay (EBAY), also has a lot riding on Apple Pay’s success. Some analysts think Apple Pay could raise awareness and excitement about mobile payments in general, which could help PayPal, especially since has both iPhone and Android apps. But others fear Apple will gather so much momentum and usage from its wealthy customer base that consumers may lose interest in alternatives.

The same could be true of Google (GOOGL), which has gained little traction with its Google Wallet app. Like PayPal, it could benefit from growing excitement about mobile payments or, more likely, lose attention as Apple hogs the spotlight.

Of course, if Apple Pay flops, Apple will lose out on a possible new revenue stream. But the company's service offerings rise and fall -- who remembers Ping? -- while iPhone sales chug along nicely. Credit card companies and banks will have lost another opportunity to secure the payment infrastructure and discourage cash purchases, as well.

In the end, it will consumers voting with their wallets – digital, leather or whatever – that will select the winners and losers in this race.

(This stort was updated on October 21 with comment from Macy's spokesman explaining their signature requirement.)