Will Apple Pay soon process 10% of all card transactions worldwide?

Will Apple Pay soon process 10% of all card transactions worldwide?

New York, February 16, 2020

Apple’s mobile wallet is consuming more and more card payments worldwide. With increasing service, it becomes a greater challenge for competitors like PayPal and attracts the attention of competitive guards.

Apple Pay currently makes up about 5% of global card transactions and, according to the latest trend data from the research company Bernstein, is well on the way to processing 1:10 of such payments by 2025. „Indeed, there are many reasons to worry that Apple might try to disrupt the payment ecosystem,“ Bernstein analysts led by Harshita Rawat wrote in a research report.

As an iPhone sales plateau, the Cupertino-based company is based on its service division, which also includes Apple Pay. The unit generated sales of $ 12.7 billion in the last three months of 2019, an increase of 17% over the previous year. The company’s payment ambitions benefit from massive cash reserves, years of card transaction experience, and a huge customer base made up of hundreds of millions of iPhone users.

The race for digital payments is an immense opportunity that represents sales of around $ 1 trillion worldwide. Visa and MasterCard process more than $ 14 trillion in payments each year and continue to grow as more and more transactions go online, flow through apps, and consumers use less cash in many parts of the world.

Apple Pay makes money by splitting every transaction that is done through the device. Users can store their credit and debit cards in their wallets and use them to make contactless payments – with biometric security – using their phone’s NFC (Near Field Communication) technology. In the U.S., contactless payments are expected to increase to $ 1.5 trillion by 2024, compared to $ 178 billion this year, Juniper Research said.

There’s no shortage of clever, feature-rich payment apps, but Apple Pay has several advantages. The app comes pre-installed on iPhones, and Apple has tight control over the device’s NFC technology, which is used for contactless payments. This is why Apple Pay is the only mobile iPhone wallet that can do NFC transactions. (Alipay and WeChat Pay, the hugely popular Chinese payment apps, use QR codes. The optical codes are read through a phone’s camera and not controlled by Apple.)

Scientists, lawyers and executives see Apple’s control over the iPhone NFC chip as a way to block competition. Apple argues against it: its guidelines serve to protect against hackers.

It is not excluded that Apple Pay will soon go its own way – by creating its own network that runs outside of the card systems.