Authentication & Security

Apple Pay International Expansion Drivers and Inhibitors, Newly Surfaced Information

MEDICIFounder and Chief Strategy & Innovation Officer

We have already seen Apple Pay winning some battles (share of proximity payments) and losing others in the US. Since its launch, Apple Pay has become available at more than 700,000 locations, including more than 2500 banking locations in the United States alone. We all knew that having this system in the US alone wouldn't make much sense and that Apple would try to go for global expansion with its mobile pay service. Considering recent events, Apple is certainly expanding to other geographies, but it seems that things may not go as smoothly in some regions as compared to the others. While Apple is expecting a positive picture in Canada (and is now close to rollout) and the European continent, China has become a tough target with (perhaps) LG grabbing the right opportunity there.

Here are the updates around Apple Pay initiatives with respect to geographic expansion:

Canada to be the First Country for Apple Pay Outside US

Apple is currently in talks with the six largest banks in Canada to launch Apple Pay as early as November, as reported by The Wall Street Journal. The banks currently in negotiations include: Royal Bank of Canada, Toronto-Dominion Bank, Bank of Nova Scotia, Bank of Montreal, Canadian Imperial Bank of Commerce and National Bank of Canada that collectively account for 90% of all retail bank accounts in Canada. This would indeed be a great start for Apple Pay in Canada. In Canada, 75% of major retailers accept contactless payments. Ten percent of the domestic transactions are contactless and this is rising at a rate of 1% every month. It's a solid market for Apple Pay to enter that has both cultural and geographic proximity to the home market for Apple.

Apple Pay gets a Boost from Visa for Expansion in Europe but there are Looming Issues

Apple is already gearing up to launch Apple Pay in the UK market. It is already hiring talent in the UK for this purpose. Negotiations between Apple and one of the largest banks in UK have not been going that smoothly; however, all major banks are expected to accept Apple Pay in one form or the other when the time comes. Besides the UK, Apple Pay is getting a booster dose from Visa for its expansion in other European countries as well. Earlier this year, Visa announced plans to launch a network tokenization service for Europe. Tokenization is a key component of the Apple Pay payment process. It has also come to light that Apple is in talks with Irish banks and financial institutions.

Not Everything is Good in the Far East - Apple Pay Plans in China Turn Sour; Reasons for Delay

China is one of the biggest smartphone markets on the entire planet, and moreover one of the greatest opportunities for mobile payments for obvious reason. But Apple has been facing hurdles lately in tapping into this opportunity. Apple has not been successful so far in getting the Chinese banks on board. Apple has been trying to pitch to UnionPay and 8 other banks. Apple Pay charges 15% of the ~2% fee on the transaction that credit card companies charge; for debit card transactions, Apple charges 50 cents in the U.S. Apparently, Chinese banks find the fee too high, hence they have been skeptical about adopting Apple Pay.

Newly Surfaced Information - Apple Pay’s attempts in the Chinese market are facing a big blow now that LG has come into the picture. LG Uplus is poised to launch a mobile payment service in China in collaboration with KB Kookmin Card and China UnionPay. LG Uplus has now become the first company, among non-Chinese companies, to establish a successful partnership with UnionPay. This could be a potential setback for Apple. Moreover, with active mobile payment systems like Tenpay and Alipay, it's hard to say whether China will incorporate Apple Pay into the mix.

One thing I know for sure - how Apple Pay expands internationally will become a great case study for B-School students over the next several years.

Amit Goel

MEDICIFounder and Chief Strategy & Innovation Officer

Amit Goel is the Founder & Chief Strategy & Innovation Officer for MEDICI. Amit’s vision is to build a strong FinTech market network that involves financial institutions, banks, startups, investors, analysts & other key stakeholders across the ecosystem – helping each one of them in a meaningful way by removing the asymmetry of information and providing a platform to engage & transact.

Amit is passionate about bringing actionable FinTech-focused insights, innovative products & services for the FinTech ecosystem. Some of his work involves startup scores, bank scores/assessments, predictive viewpoints & other innovations that have helped MEDICI’s customers and the ecosystem. He has been named amongst the Top 100 FinTech thought leaders/influencers in the world & Top 10 in Asia multiple times by reputed agencies, consulting firms as well as financial institutions. Amit has built MEDICI (formerly LTP) as a new-age, tech-enabled advisory/research firm, which is now considered the #1 global research & innovation platform for FinTech in the world.

Amit has been writing pioneering viewpoints on financial technology space that have been ahead of the curve since 2010. His data-driven predictions have helped the customers as well as the ecosystem. His past work experience includes a strong background in strategy & market analysis and advisory to clients (from big business houses to Fortune 500 firms) in payments, commerce, financial services & IT/technology. In the past, Amit had also founded a successful consulting & research practice called GrowthPraxis and has worked at Boston Analytics, Frost & Sullivan, and Daimler Chrysler in strategy & research.