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Apple Pay Is Doomed Unless It Can Do These 7 Things

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Apple is jumping into the battle over the $15 trillion payment market. (That's trillion with a T). 

Yesterday, Apple confirmed rumors that its new iPhone 6 will come with NFC technology which will let you pay for stuff in the physical world with your phone. By doing so, Apple is joining companies like Square, Google , Ebay's PayPal, Verizon and AT&T in the quest to own the digital wallet. So far everyone has failed. As I wrote earlier, the list of want-to-be wallet makers is illustrious and long. Square gave it shot and then quit. Google has whiffed twice. And then there was (the unfortunately-named) ISIS –a joint venture between Verizon,  AT&T wireless and T-Mobile (in partnership with  Visa, American Express and MasterCard) was nothing more than a  $100 million flop.

Apple won't fare any better, at least not right away. When giddy Apple fans  try to whip out their Apple Pay (it launches in October)  they'll find a slick app which they can't use anywhere. The stores that take it will be few.  It will be like owning a shiny new Ferrari without any roads to drive it over.

Technology isn't the trouble--the problem is that humans are habitual. Yes, mobile payments hit $235 billion last year--but the rest of that $15 trillion chunk was transacted the old way--with cash and credit cards. And why not? Cash and cards are simple, reliable and ingrained on the planet. Not to mention that retailers have spent lots of money and time installing payment technology and training  an ever churning roster of employees how to use the gear. Retailers don't need cool payment systems--they just need them to work. And if it ain't broke...

For Apple Pay to work, it must win over two sets of divergent clients--customers and retailers. For either side to make the switch, Apple must make paying with the iPhone 6 better, simpler and more rewarding than swiping a card. And make the experience better for both parties. "Is taping a phone easier than swiping a card?" asks PayPal's  chief product officer, Hill Ferguson. "We’ve seen that play out before. There’s got to be something more. You have to help save the consumers time, and save them money. More than ever you have to keep them safe." As former PayPal boss, David Marcus, told me (in a quote I've beaten to death): "“It has to be the experience you have online today. You’ll get what you want really fast, pay really fast and get out. And the merchant will know more stuff about you, and that will make your experience better.”

So how can Apple make its digital wallet better than that hunk of folded leather you carry with you? Here are six things it must do to even have a shot at becoming player in mobile payments.

1) Simpler than a swipe

Tapping a phone is no easier than swiping a card--maybe worse since my card doesn't need to be charged or updated. How to make it better? allow us to  leave my phone in my pocket and check-out hands free. Square and PayPal have played with this idea, but no one has yet cracked the code.

2) Perks, Perks, Perks

Speed is not enough.  Apple Pay  must offer more than credit cards. What might that look like to the consumer? It could could be a speed lane (think EZ Pass) for Apple Pay users, in-store coupons, automatic reward and loyalty points and freebies. For retailers--it must give them the firehouse of customer data that online shopping offers. Apple is pledging it won't share data so we'll see how that goes. Where can they find inspiration? Check out Starbucks--they have the best mobile experience around. I think restaurant app Cover is really cool too--it makes every joint feel like a private club. But Apple can't design these experiences itself--on to number 3.

3) Create an Apple Pay Platform

Apple knows technology. It doesn't know what pizzerias, super markets, gas stations or department stores need in a payment partner. Payments is not a one size fits all  experience. Something designed for a farmers-market is very different than one designed for Whole Foods. Retailers need to be in control and able to experiment with the customer experience. Just like iOS--Apple needs to open the Apple Pay technology and make it the tracks over which other payment apps speed along.

4) Give away the gear

Payment gear--those card readers, cash registers and touch screens--are dominated by the likes of Micros and NCR. They are expensive--especially when the back end and inventory is linked. Stores already have those systems in place. To have retailers accept Apple Pay, they must make it very easy and very cheap for retailers--big and small--to switch.

5) Have skin in the game

Here's the strange thing about Apple Pay--I don't know how Apple will make money off it. It doesn't seem like it will be collecting transaction fees--a strategy that has turned American Express, Visa, MasterCard (and on the tech side, Ebay's PayPal) into multi-billion-dollar empires. It looks like Apple added the wallet as carrot to sell more phones. Once you buy the iPhone 6, Apple has no real monetary incentive to keep  Apple Pay humming. It would be different if it needed massive transaction volume to make a buck. Right now it doesn't. That bodes poorly for retail expansion, product design and customer service. As PayPal's Hill Ferguson told me: "What happens when you have payment problem--are you going to call Apple customer service?" Apple needs to stay committed to the pay product, otherwise the it will wither and customers will flee. UPDATE: Bloomberg reports that Apple will collect bank-like swipe fees per each Apple Pay transaction.

6) Offer the service to everyone

Payments is a volume game. As of now, Apple Pay is will be available to the relatively rich--people who can A) afford an iPhone and B) customers who use credit cards. Worldwide, the number of  people who can do booth is small. Payment processing needs to be a global business. How do you fix that? Make Apple Pay an platform-agnostic app--like Google Maps or PayPal's wallet. Apple must also accept all kinds of payments: credit cards, debit cards, prepaid cards, bank account transfers--maybe even Bitcoin.

7) Safety First

Everything is secure until it's not. Home Depot credit card payments worked just fine until last week's hack. Is NFC safer than magnetic strips--yes. But Apple  needs to prove that its bullet proof--much more secure than say, Jennifer Lawrence's iCloud photos.

*** Disclosure: The writer owns Apple stock.

(Follow me on Twitter at @StevenBertoni)