Let’s look at Apple Pay from a point of view of all players involved in the process of payments:
- The merchant installs a NFC payment terminal.
- For each transaction, the merchant has to pay a fee to the credit card company.
- The bank makes sure that the merchant gets his money.
- Apple provides an easy and secure way for iPhone 6 users to pay and takes a cut from the cut the credit card company takes.
Apple gets a cut from each transaction while having no investment hardware wise. While there are a small number of users now, there is certainly a room for growth, both in increasing adoption and increasing install base (replacing old iPhones). This growth will drive the revenue, but not the cost, as Apple don’t have to scale any infrastructure. There are no servers from Apple involved, the merchants and credit card companies pay for the terminals and their own servers.
This is looking good for Apple financially wise, but what about other parties involved?
- Apple Pay is a proprietary payment system. To use it you have to buy a new iPhone.
- Apple Pay works only on NFC terminals. To use it you need to buy such terminals to every checking line.
- Apple Pay takes a part of a fee that merchant pays for each transaction.
There is a certain limit on the number of iPhones that can use Apple Pay. After all, the phone costs approximately $1000 unsubsidized. If this quarter Apple sells 50-60 million of iPhones 6 worldwide, that will be the number of potential clients for merchants. Again, this is a worldwide sales, and from the point of view of merchants in the US, or any merchants in the world, to invest into NFC terminals, just so they can accept Apple Pay is a bit unrational. Let’s not forget that even in the US the number of smartphone owners is at 66.8%. That leaves a large number of people not involved in the Apple payment system even in the country with developed economy.
Apple Pay is not and won’t be a worldwide mobile payment technology. There are a lot of limitations on availability and affordability of the technology for it to be the one. What technology can be available for 100% of mobile phone users and used in any country in the world? We’ll talk about it in the next posts. Stay tuned.read more