US retailer removes Apple Pay support after two years

2 min readUpdated Apr 24, 2019May 8, 201911:25 PM

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JCPenney has finally released an official statement. This offers a technical explanation for the retailer’s decision to “suspend all contactless payment options until a later date.” While that suggests there’s a good chance Apple Pay support will be reactivated at some point in the future, JCPenney is also hinting at modest popularity for the digital wallet app in its stores, claiming the “vast majority” of shoppers continue to rely largely on “inserting or swiping their physical credit cards at point-of-sale terminals” to complete their transactions. Original article follows.

While Apple is still selling plenty of iPhones, iPads, and smartwatches around the world, the tech giant’s “services” and software are suddenly growing at an unrivaled pace, generating revenues of nearly $11 billion between October and December 2018, up from $9.1 billion during the final three months of the previous year. Apple Pay, Apple Music, and the iOS App Store are by far the most successful and lucrative such services, at least until the Apple Arcade and TV+ platforms actually become available for end users.

Released less than five years ago, Apple Pay powered a mind-blowing 1.8 billion transactions in the last 90 calendar days of 2018, continuing its aggressive expansion stateside and worldwide with a long overdue debut in Germany, as well as major new partnerships with the likes of CVS, Target, and Taco Bell.

Curiously enough, another big US retailer confirmed on Twitter over the weekend its “decision to remove Apple Pay for our stores.” JCPenney’s move is certainly unusual (if not unprecedented), as there are still a few holdouts in Apple’s race to US ubiquity, but we can’t really remember anyone that supported the digital wallet platform for a couple of years to then reconsider without offering any sort of justification.

While not the earliest supporter of the increasingly popular app, JCPenney did embrace the service back in 2017, helping it reach 74 of the top 100 US retailers by revenue as of January 2019. That included Target and Taco Bell, so we’re guessing the count is now down to 73. That’s still an impressive number, as is the 70 percent touted by Tim Cook as the platform’s target for later this year as far as all US retailers are concerned.

Hopefully, we’ll get an explanation from JCPenney soon as to what made the department store chain pull the plug on Apple Pay support in both its retail locations and iOS app.

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What this means

JCPenney's decision to suspend Apple Pay and other contactless options, attributing it to low shopper adoption, appears a pragmatic, cost-saving move. While Apple Pay boasted 1.8 billion transactions in Q4 2018 and reached 74 of the top 100 US retailers, JCPenney claims the "vast majority" still prefer physical cards. This contrasts with retailers like Target and CVS, which recently partnered with Apple Pay, suggesting differing operational priorities or customer bases. The move will undoubtedly pressure other US retailers to assess the true commercial value and integration costs of digital wallets versus actual customer uptake. The risk for JCPenney lies in appearing technologically backward to a segment of customers. We should watch for any official statement from JCPenney detailing the specific cost-benefit analysis behind this withdrawal.

Aiko Tanaka

Questions & Answers

What reason has JCPenney given for suspending contactless payment options in its stores?

JCPenney provided a technical explanation for its decision. The retailer also indicated that the vast majority of shoppers still prefer to use physical credit cards by inserting or swiping them at point-of-sale terminals.

How long had JCPenney supported Apple Pay before removing it?

JCPenney embraced Apple Pay back in 2017, meaning it had supported the service for about two years. This move helped Apple Pay reach many top US retailers before its removal.

What is the current popularity of Apple Pay among US retailers, even with JCPenney's withdrawal?

As of January 2019, Apple Pay was supported by 74 of the top 100 US retailers by revenue, including new partnerships with CVS and Target. With JCPenney's removal, this number is estimated to be down to 73.

How much revenue did Apple's services division generate towards the end of 2018?

Apple's services, which include Apple Pay and Apple Music, generated nearly $11 billion in revenue between October and December 2018. This was a significant increase from $9.1 billion in the same period the previous year.

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