October 28, 2014
Tim Cook recently took the stage at the Wall Street Journal’s (WSJ) global technology conference to talk about Apple’s future. He highlighted the ecosystem that Apple is creating through its iDevices but what really caught my attention were the remarks about Apple Pay. Some important quotes include:
Quote #1: In the first 72 hours of Apple Pay, Apple saw over 1 million activations.
Quote #2: Tim Cook said Visa said there are already more credit cards activated in Apple Pay than in all other contactless payments combined. (this one raised my eyebrows)
The following illustration highlights how Apple Pay stands against competitors and where it could head in the near future:
Please note that while Google Wallet app download estimates have been put around 20 mn, only a fraction of them have been the contactless NFC wallet activations. Google wallet is also available for use online.
What is mind blowing is that in just the U.S., with only a handful of merchants where it will work and in just 3 days, Apple Pay had reached 1 million activations. It shows that people want this to work. Hopefully retailers will see this and get on board or get left behind. A tweet during the live event said 'Tim Cook throwing some shade at merchants who might be wary of Apple Pay; Over the long arc of time, he says, retailers will have to do what shoppers want.'
Another question that should be asked to Mr. Cook is how many active users are actually out there. If the figure is similar to others then it’s not too much. However as users upgrade from their existing iPhones to iphone6 in next 15 months, by the year 2016, more than 80% of Apple users will have the ability to go cashless. And by then probably large number of retailers will accept Apple Pay. That will be huge.
Now speaking of transactions, Smartphone owners in the U.S. bought $500 million worth of goods and services using mobile wallet apps in 2012 (Berg Insight). So in 2013, 40-50 mn subscribers are estimated to have completed around $1 billion transactions using their phone. It is to be seen whether Apple Pay could reach a significant amount in transactions in this quarter but in 2015 it could actually enable more than $2 billion of sales easily if you do the maths (24 mn additions this quarter from the chart above). It could be much more if it explodes. I am still not talking about foreign markets such as Canada, Australia, Part of Europe, Japan, Korea and of course China.
Alibaba Group, which recently raised $25 billion in the world’s biggest initial public offering, is interested in cooperating with Apple Inc. in financial payments, the Chinese company’s executive chairman said at the Wall Street Journal’s (WSJ) global technology conference.
The retailers who are not joining the mobile wallet initiatives like Apple Pay are making a mistake according to me. Customers adopting mobile wallets would eventually start asking questions at the point-of-sale if they see no such services. Reddit, the social media platform, recently witnessed uproar against U.S. retailers disabling NFC based contactless payments.
I feel that the existing fragmentation in the payments ecosystem in not good for the industry as a whole.