is nagging iPhone users to enroll in its mobile-payment service with a persistent red circle badge. The strategy has worked with some, but is irritating others who say it is heavy-handed and exploits the tech giant’s clout in ways that could disadvantage rivals.
The tactic, part of the iPhone’s latest operating software launched last fall, is subtle. Users who opt not to input credit-card information for Apple Pay when setting up their phones now constantly see the red circle over their settings icon, indicating their setup is incomplete. Some users also periodically get notification reminders that go away only once they start the enrollment process.
Apple Pay allows users to upload credit or debit cards to an iPhone and securely pay at stores by holding the device above a contactless terminal. Apple makes money by charging banks a slice of each transaction through the mobile-payment service, which it said in 2014 would make cash and physical credit cards obsolete.
Though payment analysts say the service speeds up checkout times and is more secure than traditional cards, Apple Pay has struggled to earn broad adoption in the U.S. Many remain skeptical that it is more secure, including
a 29-year-old professional comedian from Queens, N.Y., who prefers using his credit card directly.
“This is the most aggressive they’ve ever been,” said Mr. Frederick, who has had a red badge over his iPhone settings since updating his software in mid-January. He said the notification has made him consider trading his iPhone 6 for a Google Pixel. “All that from one dot,” he said.
The Apple Pay push reflects how tech titans increasingly are using their own devices, software or data to promote their businesses, sometimes at the cost of smaller rivals.
sometimes steers Alexa shoppers to its own brands, and
Google has been accused of blocking rivals’ ads on its Chrome browser. Amazon said customers can always ask for specific brands. Google denied having undue influence over ad-blocking rules.
“Everyone is doing essentially the same trick,” said
an analyst with Endpoint Technologies Associates. “It’s really antitrust behavior.”
Mr. Kay compared Apple Pay setup badges and notifications to
bundling its Internet Explorer browser with Windows in the 1990s—a strategy the Justice Department successfully sued to stop on antitrust grounds saying it hurt rivals. “They used to have actual behavioral remedies and say you can’t do this,” Mr. Kay said.
Apple declined to comment on potential antitrust concerns. The Justice Department didn’t immediately respond to a request for comment.
This marks one of the first times Apple has used a red-badge notification to push one of its services that generates revenue. The badges are effective at driving users to take action because people know the red circle means something needs attention, said
a principal with Nielsen Norman Group, a user-experience consulting firm.
“The real problem is there’s no differentiation between, ‘We want to bring your attention to it because it’s vital,’ and something like this that for some people it’s vital and others it’s not,” said Mr. Tognazzini.
Apple’s own guidelines, posted online for some devices, advise developers to minimize badges and only use it to “present brief, essential information and atypical content changes.”
The tech giant is trying to accelerate the growth of its services business, which includes Apple Pay, its music-streaming service and App Store sales. Its goal is for the $29 billion business to generate more than $40 billion in revenue by fiscal 2020. The company is leaning on that business to offset stagnating smartphone shipments, which account for two-thirds of revenue.
Early estimates indicate Apple’s software change has helped boost Apple Pay enrollment. After launching iOS 11 in September, Apple Pay was enrolling more than two million users weekly for a month—more than double the roughly 750,000 it previously added weekly, according to Loup Ventures, a venture-capital firm specializing in tech research. The pace has since slowed to 1.5 million new enrollments a week.
An estimated 34% of new iPhone owners link a card to Apple Pay during setup and 18% have used it in the past 90 days, according to 451 Research, a technology research firm. Alphabet Inc.’s Google Pay, formerly known as Android Pay, and
Samsung Pay don’t use the same tactics as Apple and about 8% of users have used those services in the past 90 days, said 451 Research.
and Zelle, a service created by U.S. banks, are among the companies and apps competing against Apple in mobile payments.
founder of the Pay Finders app that maps Apple Pay retail acceptance, said those companies stand to lose as Apple becomes more aggressive. “They’re going to have to move someone else aside,” he said.
PayPal and Square, which have partnerships with Apple, said they support efforts to encourage people to adopt mobile payments. Zelle declined to comment.
At Apple’s annual shareholder meeting in February, Chief Executive
said mobile payments have taken off slower than he expected. Some consumers remain wary of potential security risks and others are uncertain about where Apple Pay is accepted. However, Mr. Cook said he hopes he will “be alive to see the elimination of money.”
—Peter Rudegeair contributed to this article.