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Apple Pay’s surprising use case in remittances

Apple Pay still struggles to displace cash and cards in the U.S., but its recent integration with Western Union shows the mobile wallet has some untapped potential.

Only 13% of iPhone users have ever used the mobile wallet, according to a report from The Wall Street Journal citing research by Loup Ventures. With those low numbers, many might wonder why Western Union would go through the trouble of adding Apple Pay to its digital channels (Western Union has supported Apple Pay at its agent locations for some time).

As it turns out, there is some decent overlap of Apple Pay users and Western Union customers. According to Tim Sloane, vice president of payments innovation at Mercator Advisory Group, 29% of Apple Pay users aged 18 and up also utilize Western Union.

IMAGE: Bloomberg News

“While initially I thought that the overlap between [Western Union] customers and Apple Pay customers would be relatively small, our Customer Monitor Survey Series … indicates my assumption is incorrect,” said Sloane.

This finding puts Western Union in line with the roughly one-third of US merchants accepting Apple’s mobile payment scheme.

iPhone users typically have higher incomes and higher average ticket prices when they shop, and they shop more often than groups with other handsets, said Sloane. “So that should make Western Union happy,” he said.

For Western Union, the decision was all about pleasing that portion of the market, which tend to be very loyal customers, said Khalid Fellahi, senior vice president and senior manager of Western Union digital.

“If we can eliminate a couple steps in the registration process or the transaction for our customers or allow them to manage more easily their cards in one place without having to change that within our app, this brings customers a lot more convenience and doesn’t change anything in the economics of the transaction for us,” Fellahi said. “And we estimated that this population was big and important enough to provide them with this convenience.”

As with other Apple Pay integrations, Western Union allows the mobile wallet to stand in for the manual entry of payment card information, as well as supporting Touch ID fingerprint authentication.

Even if Apple Pay usage for remittances is still lower than other funding methods, according to Fellahi, Western Union wants to stay “ahead of the pack in testing new payment methods because you never know when things are going to take off and have much bigger adoption.”

Talie Baker, an analyst with Aite Group’s retail banking and payments practice, acknowledges that this is probably Western Union’s main reason for supporting Apple Pay.

“Western Union invests a lot in innovation to keep up with the smaller startup disruptors in the space, and they do some really cool stuff technology wise that help them remain a market leader,” Baker said. “Although Apple Pay has been slow gaining momentum in the U.S., as consumers become more familiar with digital payments there will be greater adoption of the technology.”

And it looks as if Western Union’s audience is becoming more tech-savvy. According to Western Union’s internal research, its web and mobile business is the fastest-growing segment. Transactions on WU.com grew 28% from the third to fourth quarter of 2016 and its consumer-to-consumer revenue increased 27% on WU.com over the same period.

While Fellahi wouldn’t share specific numbers on in-app Apple Pay adoption, he said customers are using it and satisfied. The initial patterns show the user demographic skewing towards millennials that already use their mobile device to initiate payments elsewhere, he said.

The company plans to roll out the in-app Apple Pay service in the U.K. soon, and also has a strategy for supporting other mobile wallets including Android Pay and Samsung Pay.


Bailey Reutzel

Bailey Reutzel

Bailey Reutzel is a freelance reporter and author of MoneyTripping. She was previously a staff writer at PaymentsSource.

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