US banks are in a marketing race to persuade users to choose their cards as the default option under Apple Pay—the technology group’s mobile payments system launching next month.
But while all the major banks have allocated large budgets to the battle, they do not have a free hand in what they can do. Marketing staff from the banks are due to meet at Apple’s headquarters in Cupertino on Tuesday, according to people familiar with the matter, to receive strict guidelines on how they can advertise Apple Pay to customers.
Last week, Apple announced that its new iPhone 6 would allow users to pay for products by tapping it against a terminal or opening an app when shopping online—using stored credit or debit card information to complete the transaction electronically, without having to type in payment details or shipping addresses.
The largest card issuers—led in the US by JPMorgan Chase, American Express, Bank of America, Wells Fargo and Citigroup—are already eyeing the benefits of having users nominate their cards as the default card on Apple devices. Some smaller competitors fear they may lose out.
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“It’s a healthy competition,” said Kristin Lemkau, chief marketing officer at JPMorgan Chase, which had commissioned advertising “creative” material well in advance. “We wanted to be first to have our creative about Apple Pay launched on our mobile app, on our website, in the 5,600 branches, on our ATMs, and on our Times Square sign. We were up that night.”
She added: “You want to create an incentive for people to download their card in Apple Pay and use it as their default card.”
Jud Linville, head of cards at Citi, said the competition was going to be about designing an “elegantly simple and secure” customer experience.
“There will be some who are really good at it and some who are slower to build those things and market them effectively,” he said. “I’m leading my team as if ‘this is first to the prize’.”
Banks do not yet know full details of Apple Pay’s functionality, but most believe it will result in customers being likely to adopt a default card, rather than browsing through a virtual wallet of payment options to select one of up to eight that can be uploaded.
They are also hoping that customers will be more likely to select a credit card as the default payments method. Credit cards take higher fees from retailers than debit cards.
If customers do choose a default card from a small selection of heavily-promoted big bank issuers, smaller banks risk losing market share.
“The details around paid communications within Passbook [the app that currently stores customer information] are going to be critical to competition,” said Matt Krogstad, head of mobile at Bank of the West, the San Francisco-based lender.
“If I can pay to put an advert within Passbook—eg tap here to make this the default card—then Apple has created a scenario where whoever the highest bidder is will be able to communicate with customers. That will be a negative.”
Date: September 16, 2014