Sept. 10, 2014 7:49 p.m. ET
Apple Inc. AAPL +3.07% Apple Inc. U.S.: Nasdaq $101.00 +3.01 +3.07% Sept. 10, 2014 4:00 pm Volume (Delayed 15m) : 99.80M AFTER HOURS $101.19 +0.19 +0.19% Sept. 10, 2014 7:59 pm Volume (Delayed 15m) : 1.07M P/E Ratio 16.21 Market Cap $586.75 Billion Dividend Yield 1.86% Rev. per Employee $2,214,380 09/10/14 Asian Shares Mostly Rise on Ja... 09/10/14 Overheard: Apple Wipes Shine O... 09/10/14 The Classic iPod is Gone But T... More quote details and news » has lined up an impressive list of banks and credit-card issuers to support its new mobile-payment service. Now all it needs is more merchants, and customers.
Apple hopes its service, Apple Pay, will prompt shoppers to ditch their wallet and make purchases with an iPhone. The system relies on a technology known as near-field communication, or NFC, that has had trouble winning acceptance from merchants.
Merchants must install a reader at their checkout line for so-called tap-and-go payments. NFC readers are being used by fewer than 10% of merchants, according to Gartner analyst Mark Hung.
Starting in October, Apple said iPhone owners will be able to use Apple Pay at 220,000 U.S. locations, including McDonald's Corp. MCD +2.10% McDonald's Corp. U.S.: NYSE $93.00 +1.91 +2.10% Sept. 10, 2014 4:00 pm Volume (Delayed 15m) : 11.70M AFTER HOURS $92.90 -0.10 -0.11% Sept. 10, 2014 7:17 pm Volume (Delayed 15m) : 328,306 P/E Ratio 16.73 Market Cap $89.44 Billion Dividend Yield 3.48% Rev. per Employee $64,315 09/10/14 Will Stores Warm Up to Apple P... 09/09/14 Apple Unveils Smartwatch, Firs... 09/09/14 U.S. Stocks Extend Losses More quote details and news » , Bloomingdale's and Macy's. By comparison, the Electronic Transactions Association said more than nine million U.S. merchants accept credit and debit cards.
"Apple has rallied the issuing bank side, but not the merchant side," said Richard Crone, chief executive of Crone Consulting, a payments advisory firm. "Many merchants who had NFC acceptance have turned it off."
Best Buy Co. BBY +1.60% Best Buy Co. Inc. U.S.: NYSE $32.31 +0.51 +1.60% Sept. 10, 2014 4:02 pm Volume (Delayed 15m) : 4.09M AFTER HOURS $32.31 0.00 % Sept. 10, 2014 4:33 pm Volume (Delayed 15m) : 109,827 P/E Ratio 11.66 Market Cap $11.09 Billion Dividend Yield 2.35% Rev. per Employee $297,579 09/10/14 How Toys 'R' Us Plans to Battl... 09/10/14 Corporate News: News Digest 09/09/14 Rakuten to Buy Ebates for $1 B... More quote details and news » , for example, installed NFC-enabled scanners in many of its stores but switched them off in 2011 because the cost of supporting the platform was too high, the company spokesman said.
The retailer has no plans to change course following Apple's announcement.
In part, mobile payments have suffered from a classic chicken-and-egg situation. Smaller merchants in particular were reluctant to install the systems—which can cost $300 to $500 per device—because few consumers were using them. Moreover, merchant fees for mobile-payment systems can be higher than for plastic cards, particularly for debit cards, Mr. Crone said.
Apple has a successful track record of helping to thrust existing technologies or services into the mainstream. It did so with touch-screen technology when it created the original iPhone. It also popularized legal music downloads when it created iTunes and allowed consumers to buy a song at a time instead of an entire album.
NFC technology dates back more than a decade and has been hyped as the gateway to enabling mobile payments. In 2011, Google Inc. GOOGL +0.24% Google Inc. Cl A U.S.: Nasdaq $593.42 +1.45 +0.24% Sept. 10, 2014 4:00 pm Volume (Delayed 15m) : 1.14M AFTER HOURS $592.05 -1.37 -0.23% Sept. 10, 2014 7:42 pm Volume (Delayed 15m) : 18,423 P/E Ratio 30.15 Market Cap $396.70 Billion Dividend Yield N/A Rev. per Employee $1,321,030 09/10/14 Digits: Google's Hardware Shif... 09/10/14 Will Stores Warm Up to Apple P... 09/10/14 Europe's Google Piñata More quote details and news » introduced Google Wallet, its NFC-linked payments service that has been added to many smartphones running its Android operating system, but that initiative has failed to gain much traction.
Apple will also benefit from good timing. Credit-card networks are pushing retailers to install payment terminals that accept cards embedded with a chip. If they fail to do so, the merchants, instead of the banks, will be liable for any fraud stemming from chip cards starting in October 2015.
In the process of upgrading the terminals, many merchants will also include the contactless readers and thus will simultaneously become NFC-payment ready.
The question remains whether Apple can get retailers to turn on the NFC machines.
Some big merchants remain skeptical. Reed Luhtanen, Wal-Mart Stores Inc. WMT -0.30% Wal-Mart Stores Inc. U.S.: NYSE $76.51 -0.23 -0.30% Sept. 10, 2014 4:00 pm Volume (Delayed 15m) : 6.49M AFTER HOURS $76.51 0.00 % Sept. 10, 2014 6:11 pm Volume (Delayed 15m) : 204,204 P/E Ratio 15.61 Market Cap $247.30 Billion Dividend Yield 2.51% Rev. per Employee $218,400 09/10/14 Family Dollar Bucks the Right ... 09/10/14 How Toys 'R' Us Plans to Battl... 09/10/14 Target Narrows the Bull's-Eye,... More quote details and news » 's senior director of payments strategy confirmed consumers won't be able to buy things at the world's largest retailer with Apple Pay.
Best Buy and Wal-Mart are instead backing a retailer-owned mobile technology group called Merchant Customer Exchange, which also counts Target Corp. among its members.
MCX's payment service requires only a software download and can be used on existing iPhones and Android devices, whereas Apple's is only for the latest generation handset.
The group announced the launch of a mobile wallet application called CurrentC, which it said will run as a pilot in certain cities before being rolled out nationally in 2015.
CurrentC said it will link with customers' checking accounts, retailer gift cards and select merchant-branded debit and credit accounts but doesn't currently sync with traditional credit cards. Unlike Apple Pay, CurrentC doesn't use NFC technology. Instead a retailer scans a digital QR code on its smartphone app.
Checkout systems from startup Square Inc., Amazon.com Inc. and PayPal aren't equipped to process NFC payments, meaning potentially millions of mom-and-pop shops, taco trucks and corner stores won't be accepting Apple Pay when it launches next month. Representatives of the three companies said they had no immediate plans to enable NFC.
Apple's announcement has stoked interest in the technology. Revel Systems Inc., which provides software for checkout registers at merchants such as Popeye's Louisiana Kitchen Inc., was flooded with calls Tuesday from about 50 clients wondering how they could enable NFC payments, said Chief Technology Officer Chris Ciabarra. He said their NFC reader and software bundle costs $499, though he said he hopes to lower the cost over time.
"The truth is, today, no one uses NFC," said Mr. Ciabarra, noting just two of San Francisco-based Revel's customers use the payment technology. "For this to take off, it has to start with that reader device."
Silvio Tavares, chief executive of the CardLinx Association, a payments industry group, said Apple has joined with merchants such as Walgreens Co., Subway and Whole Foods Market Inc. WFM +0.73% Whole Foods Market Inc. U.S.: Nasdaq $38.63 +0.28 +0.73% Sept. 10, 2014 4:00 pm Volume (Delayed 15m) : 3.19M AFTER HOURS $38.57 -0.06 -0.16% Sept. 10, 2014 7:01 pm Volume (Delayed 15m) : 86,378 P/E Ratio 25.08 Market Cap $13.85 Billion Dividend Yield 1.24% Rev. per Employee $177,474 09/10/14 Why's Apple's Tap-to-Pay Beats... 09/10/14 Will Stores Warm Up to Apple P... 09/09/14 Corporate Watch: News Digest More quote details and news » where shoppers make "everyday purchases" with the goal of getting consumers accustomed to shopping with an iPhone or the Apple Watch. If enough shoppers get used to buying things that way, other merchants may feel pressured to open up to NFC and Apple Pay.
"You start to build the habit and then that's what builds the tipping point," said Mr. Tavares. "If anyone can do it, Apple can."
—Robin Sidel, Shelly Banjo and Drew FitzGerald contributed to this article.
Write to Daisuke Wakabayashi at Daisuke.Wakabayashi@wsj.com and Greg Bensinger at greg.bensinger@wsj.com
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