Will Retailers Cause Apple Pay to Fail?

Apple has had impressive initial success getting its user base to adopt its mobile payment technology, but problems on the retailer side of the equation could halt the growth of the system.

Since Apple Pay launched on Oct. 20, 2014, 11% of all credit-card-owning households and 66% of iPhone 6 owners have adopted it, according to new research from Phoenix Marketing International. The study found that 82% of adopters linked a credit card to Apple Pay, while over 53% linked a debit card and 20% included a reloadable prepaid card in the new wallet.

Those numbers are fairly spectacular and, on the user side, the numbers just keep getting better for Apple, according to PMI. "Setting a new standard in conversion from 'app-ready' to 'app usage', 88% of those setting-up the wallet went on to use Apple Pay to make an in-store or in-app purchase," according to the report. That beat the pre-Apple Pay market where "the average conversion rate hovered around 50%."

The results should be encouraging for Apple, but it's not all smooth sailing for the payment system as PMI found that a number of willing users are experiencing problems at checkout when they attempt to pay using their iPhone.

You can use more than one credit card with your Apple Pay account. Source: Apple

What's going wrong?Essentially, Apple's user base is eager to try Apple Pay but many are finding that retailers -- even ones promoting that they offer it -- are not actually prepared to accept it at checkout.

"The early on transaction potential is being undercut by low repeat usage and lost payment opportunities," said Greg Weed, director of card research at Phoenix in a press release. "The demand is there: 59% of Apple Pay users have gone into a store and asked to make a purchase with Apple Pay. But so is the disappointment: 47% visited a store that was listed as an Apple Pay merchant only to find out that the specific store they visited did not accept (or were not ready to accept) Apple Pay."

People want to use the technology. They have gone through the process of setting it up (which is relatively simple, but not entirely intuitive) and are being thwarted by merchants who are less committed.

"Even though Apple Pay users generally give the scheme high marks and 23% expect to significantly increase use over the next three months, problems at check-out are downgrading transaction potential," said Leon Majors, senior vice president at Phoenix. "Two-out-of-three Apple Pay users have reported a problem at checkout -- mostly related to terminals not working or taking too long to make the transaction, inaccurate posting of transactions and the inability of cashiers to help buyers who needed assistance in using Apple Pay."

This lack of retail commitment could ultimately derail Apple Pay as users are only going to pull out their phone to pay so many times before giving up on the technology. It may not be a fatal flaw, but Apple does have a problem in that its technology exists slightly outside most retailer's existing payment setups.

That means that getting it to work properly in stores involves not only training, but buy-in and willingness from store workers.

Can Apple fix this?Weed suggests that in the short term Apple adds a continuously updated store directory in its Passbook app to let users know where the technology is being accepted. Apple currently posts a list of participating retailer online, but that may not be enough.

"Posting a list of participating retailers on a website is not cutting it. In the last four months, 48% of users have paid with Apple Pay just one time and that's not going to cut it either," he said.

Apple is facing a choke point that has long been a problem in the retail world. Training personnel to do something new is not an easy or an overnight process. It also does not help that many retailers use part-time and seasonal help, which makes training an ongoing problem.

The iPhone maker has what appears to be good technology that its customers want to use. To make it possible for them to use it the company has to work harder to get retailers to not only sign on, but actually implement the technology and train their people to use it.

That could happen -- especially if Apple's user base demands it from the stores they shop in. But, if the company does not act quickly, it's possible that its users will install Apple Pay, fail to be able to use it regularly, and fall out of the habit of trying.

The article Will Retailers Cause Apple Pay to Fail? originally appeared on Fool.com.

Daniel Kline owns shares of Apple. He has installed a credit card in Apple Pay but has yet to try to use it. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.