December 23, 2014
When Apple first launched its mobile payments service, some industry experts thought that Apple could be the game-changer in payments. Meanwhile, some even speculated that Apple might be subjected to some restrictive financial regulations that may trouble the company later. The months to come will show whether Apple Pay was indeed a misstep. This recent report by ITG says otherwise.
Investment Technology Group recently released the ‘Investment Research Report on Mobile Payments’, focusing on the new Apple payments product, Apple Pay. Based on early trends since the October 20th launch, the research finds that Apple Pay has the ability to significantly transform the mobile payment space.
The ITG Mobile Payments report, which uses data from the ITG Investment Research proprietary consumer panel, found that Apple Pay was responsible for 1% of digital payment dollars in the month of November. This is a strong showing considering that the service is only available to Apple customers with the newest hardware and it is currently supported by a relatively limited list of merchants.
In comparison, Google Wallet, which launched in 2011, accounted for 4% of digital payment dollars in the same month. Although Google Wallet accounted for more share in the month, consider these two facts:
We think what Apple Pay achieved in comparison to Google Wallet is remarkable.
Apple Pay could pose a major threat to market leader PayPal's current dominance of the Mobile Payment space, as cited by Steve Weinstein, Senior Internet Analyst at ITG Investment Research, in an official press release. Citing PayPal's significant infrastructure barriers (a challenging relationship with payment counterparties and the lack of biometric capability) in comparison with Apple Pay's compelling mobile payments solution, Weinstein believes that it will be difficult for PayPal to match the ease of use and consumer appeal of the Apple solution.
As per ITG data, PayPal accounted for 78% of digital payment dollars in November. But PayPal’s lack of a compelling mobile payments solution may hurt its long-term prospects. 60% of new Apple Pay customers used Apple Pay on multiple days through November, suggesting strong customer engagement. In comparison, new PayPal customers used the service on multiple days during the same time period just 20% of the time.
Other insights include:
The following table shows the top 5 Apple Pay retailers along with the transaction and spending distribution:Rank Merchant % of Apple Pay transactions % of Apple Pay dollars 1 Whole Foods 20% 28% 2 Walgreens 19% 12% 3 McDonald’s 11% 3% 4 Panera Bread 6% 2% 5 Subway 3% 1% Top 5 58% 45%
According to a Forrester estimate, Apple Pay is expected to grow to $142 billion by 2019. Although Apple Pay lags far behind industry leaders, it has performed quite strongly compared to other similar established services in the limited period since launch. Apple Pay clearly appears to be moving in the direction leading to a game-changing success.