The Wall Street Journal had an interesting piece last week that talked about the slow but steady adoption of Apple Pay over the past eight years. According to the reporter, Ben Cohen, more than 75 percent of iPhones now have at least one form of payment linked to Apple Pay and 90 percent of all stores accept the contactless payment method. 

I read it shortly after I had read through the Federal Reserve's 2022 report on how consumers choose to pay for things--which is an exciting read, let me tell you. Still, the two things sort of merged in my brain and I started thinking about how Apple is not only driving change in how we pay for things, it's on a slow march toward dominating yet another industry. 

When you think about it, Apple Pay has almost managed to pull off the most coveted feat of branding--it's basically synonymous with contactless payments. I've literally never heard anyone ask, "Do you accept Google Pay or Samsung Pay?" It's possible that no one is using either service, but I think it's more likely that people just think of anytime you tap your phone to a card reader as Apple Pay. 

As one data point in support of this hypothesis, at Kroger--the largest grocery chain in the U.S.--some stores have added labels to the card readers letting people know that you can't use Apple Pay. Really, they just mean they don't accept contactless payments and you still have to insert your chip into the reader. The labels, however, say "No Apple Pay."

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I asked an employee at our local Kroger why, to which she replied that before the label they would get a handful of people every day who just stood there trying to tap their iPhone to pay for their groceries. I reached out to Kroger's corporate office about the labels and why the chain doesn't accept Apple Pay, but did not receive a response prior to publication.

I do think Cohen gets one part wrong, however. That is, he suggests Apple's biggest barrier to more widespread adoption is that people prefer using their physical credit cards:

But its rival isn't just Cash App and PayPal or Google and Samsung. It's the convenience of credit cards. And those are still winning. Apple's executives argue the enhanced security of Apple Pay helps make for a superior consumer experience, but there is not yet a compelling reason to pick a phone over plastic. Unlike scanning a mobile boarding pass, which took off in barely any time because it eliminated the hassle of printing, Apple Pay doesn't reduce much friction.

Cohen has a point, but I'm not sure it's the right one. Listening to Cook talk about the success of Apple Pay, he emphasized that "the growth of Apple Pay has just been stunning. It's been absolutely stunning."

More important, however, he suggested it still had a lot of room to grow because "there's still a lot of cash in the environment." To be more specific, cash is used for roughly 20 percent of all transactions, though that's down from 26 percent in 2019. 

The obvious reason is that Covid-19 had a role to play in people moving toward contactless payments. That's certainly good for the adoption of Apple Pay. The idea of handling cash isn't something most people get excited about in the middle of a pandemic. Some stores stopped taking cash altogether, at least temporarily. 

But the point Cook is making is that Apple Pay isn't necessarily competing with people using their credit card at the checkout counter in their local Target. Apple seems to see its main competition as people pulling cash out of their pocket. 

In Apple's ideal world, the iPhone is your wallet. Most people say they would prefer to lose their wallet than their iPhone, but they're still carrying both. Apple wants to change that and Apple Pay is a big part of that strategy. It has to be just as fast and convenient--if not more so--as pulling cash out of your pocket.

Obviously, that depends on businesses like Kroger accepting Apple Pay. If you're the largest grocery store chain, that means you have a lot of stores with a lot of checkout lanes, and a lot of credit card readers. Updating them all is expensive at that scale.

To that end, Apple has been trying to sweeten the deal with things like Apple Pay Later, which lets customers choose to pay over six weeks. The store, however, still gets paid just like any other Apple Pay transaction. 

It's not hard to see why Apple is patiently pursuing Apple Pay dominance. Some analysts estimate contactless payments to be worth almost $2 trillion. That's real money, and Apple didn't become the world's most valuable company by ignoring opportunities like that. It also makes the iPhone even more valuable--which is priceless.