How Apple Pay Revolutionizes Online Conversions

The launch of Apple Pay last month is a significant development in mobile payments, which is set to dramatically change the way that consumers shop in-store.

While much of the attention has been focused on the use of phones and watches in-store as payment devices, Apple Pay will change online shopping as well and have a major impact on which devices customers choose to use. For many Apple users, it will be easier and faster to purchase on their mobile devices than on a desktop or tablet. For these users, "Mobile First" reflects that their phone is their primary conversion device, replacing their physical wallet.

Consumers spend more time on their mobile phones than on any other device. We check our smartphones on average 150 times per day, and experience distress when separated from our phones for more than a few minutes. We check our phones in our spare minutes — waiting in line at Starbucks, in bed, on the train, waiting for meetings to start, during the boring bits of meetings and TV, etc. More than 60 percent of email is now opened first on a mobile device.

However, phones still aren't used primarily as a shopping device because of the challenges presented by the online checkout process. SeeWhy research shows that 97 percent of shoppers that have added to a shopping cart will abandon the site when reaching checkout on a smartphone.

There are three key reasons why:

1. Small screens, big fingers: Entering data on a small screen is fraught with difficulty and easily susceptible to errors. Consumers have learned to bail as soon as they see "Register," "Guest Checkout" and "Login" on a smartphone.

2. Not enough hands: If you use one hand to hold your phone and the other to type, how do you get your credit card out of your wallet? You have to put the phone down, extract the card, then try and hold both card and phone in one hand. It's possible, but hardly convenient. A small percentage of consumers have solved the problem by learning their credit card details by heart, but it's unlikely that we can train all consumers to do so.

3. Remembering passwords: In cases where account and credit card details have been stored by the merchant, conversion rates are significantly higher simply because the user doesn't have to enter shipping and billing addresses along with their credit card info. It all depends on being able to remember a password, however. Consumers struggle to remember passwords, and as a result often end up with multiple accounts at the same merchant. Going through a password recovery process on a mobile device isn't ideal, causing more users to bail.

Apple has solved all of these problems in a single stroke. By making the screens bigger on the iPhone 6 and 6 Plus, mobile conversion rates will increase simply because it's easier on a larger screen. That will make searching and selecting products much easier.

Apple Pay also bypasses data entry and form filling completely by storing payment details on the phone itself in PassBook. Sign up is simple — a single button press will use the payment details already stored in your iTunes account. And to crown it all, there's no need for a password; thumbprints replace passwords completely using Touch ID.

To quote Apple: "Checkout can happen with a single touch, so there's no need to manually fill out lengthy account forms or repeatedly type in shipping and billing information, and card details are kept private and are not shared with the online merchant."

Many companies have adopted a "mobile first" strategy where e-commerce design is focused on the requirements of the small screen. Until now, mobile first has been primarily about finding and searching for products. Checkout optimization has been limited due to a reluctance by many retailers to store payment details because of the increased security risk.

Alternative payments (e.g., PayPal, Google Wallet, V.me) have been dogged by slow adoption by merchants, a lack of familiarity, and in the case of PayPal, consumer mistrust about hidden charges. Amazon.com recently also entered the payments market, but there's a different trust issue which has gotten in the way — retailers are reluctant to put Amazon Payments on their sites since in many cases Amazon is a competitor.

Apple appears to have pulled off a masterstroke, combining existing technologies and principles in an innovative and very consumer friendly way, tackling the trust issue at the same time.

This won't happen overnight as retailers now have to adopt additional payment methods on their websites in order to see the corresponding increase in conversion rates. Research shows that using alternative payments will more than double smartphone conversion rates, which is compelling data that encourages retailers to examine the alternative payment landscape.

Providing a raft of different payment types makes no sense — too much choice confuses users and clutters the page, taking focus away from the call to action. By basing payment choices on the operating system of the device, the user experience can be simplified dramatically. That means that Apple users have Apple Pay, and Android users get Google Wallet, both offering very simple checkout processes leveraging iTunes and PlayStore accounts respectively.

It's a brave new world in payments, and you probably sense a changing of the guard. There's significant opportunity here for retailers and brands. When bank robber Willie Sutton was asked why he robbed banks, he replied "because that's where the money is." Like Willie, retailers need to focus on where the money is. If users are spending their time on mobile, that's where the conversion needs to take place.

Charles Nicholls is chief strategy officer of SeeWhy, a real-time remarketing company.