“Apple is again looking to revolutionise an industry with Jobs’ successor Tim Cook revealing this week its entry into the finance sector with Apple Pay,” The Financial Times reports. “Payments, he said in language reminiscent of Jobs’ original comments, is a ‘huge business,’ with $12bn worth of daily transactions in the US alone, restricted to using an ‘antiquated’ card swipe system. The banks, technology companies and retailers that have ‘dreamed of replacing’ the wallet with the smartphone have ‘all failed,’ he declared.”
“Such is the sway of the tech company that JPMorgan, Visa and the other banks and payments networks sent senior executives to Mr Cook’s presentation on Tuesday to pay homage. Bank chief executives fawned about the ‘exceptional customer experience’ and the ‘exciting move,'” The Financial Times reports. “They are also paying hard cash for the privilege of being involved: 15 cents of a $100 purchase will go to the iPhone maker, according to two people familiar with the terms of the agreement, which are not public. That is an unprecedented deal, giving Apple a share of the payments’ economics that rivals such as Google do not get for their services.”
“Banks are willing to lose a slice of revenues in the hope that Apple Pay will become ubiquitous. That would drive up transaction volumes – and therefore overall revenue – and could reduce losses to fraud through its tighter security. MasterCard and Visa now cover the cost of card fraud, but from next year will hold retailers responsible if they do not use the ‘chip and PIN’ technology that is widespread in Europe but nearly unheard of in the US. The new retail terminals often allow both PIN and NFC transactions. That could speed uptake of Apple Pay,” The Financial Times reports. “‘What Apple really announced was the end of the plastic credit card, but not the end of paying by credit,’ says Jason Oxman, chief executive of industry group Electronic Transactions Association… Just as the iPod killed the CD, Apple hopes to see off plastic and paper payments.”
Much more in the full article here.
MacDailyNews Take: Mo’ money, mo’ money, mo’ money! Great news for Apple and AAPL shareholders!
When it comes to Apple Pay, Eddy Cue certainly looks to have done an exemplary job of getting the ink.
The future of Apple TV continues to await the icing of deals (perhaps more for Jimmy Iovine than for Eddy).
Lastly: Google’s going to rue the day they got greedy by deciding to try to work against Apple instead of with them. – MacDailyNews, March 9, 2010
[Thanks to MacDailyNews Readers “Brawndo Drinker” and “Bill” for the heads up.]
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Apple Bank is only a matter of time – September 12, 2014
The hidden brilliance behind the timing of Apple’s adoption of NFC – September 12, 2014
MasterCard SVP: Apple Pay trumps traditional credit and debit cards in security – September 11, 2014
Authorize.Net announces support for Apple Pay – September 11, 2014
Apple Pay’s myriad advantages over the $300 million Google Wallet flop – September 11, 2014
Apple Pay may boost sales of larger iPhones, hurt Android phone sales – September 11, 2014
Why Apple Pay will hurt PayPal – September 10, 2014
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This could quickly become a $2 billion per year business for Apple. A big number, but won’t move the needle for Apple.
Apple needs to kept track of security- proving that it can be done correctly and then their on their way to an even bigger payoff.
In addition, someone has to make the retail terminals both at cash registers and mobile ones for places like restaurants and farmers markets. I was kind of surprised Apple didn’t announce such products.
Let’s see….
$12Bn in daily transactions
Divided by $100
times $0.15
Seems to me that if they snagged all the daily transactions (granted, never going to happen, but…) they’d pull in
$180,000,000 ***PER DAY***
So it certainly has the potential to grow beyond $2Bn/year.
But I concur, it will probably reach $2Bn/year pretty quick and still have lots of room to grow after that.
I’m starting to get that, “omg, they must be stopped!” feeling that always comes when its too late.
I would also be saying it if it wasn’t going to make purchases easier and more reliable… It should happen, it’s a good thing for everyone involved!
This is what I get:
$ 12,000,000,000 (12 billion) value of daily US credit transactions
÷ 100 (ie, Apple gets 15¢ per $100)
= 120,000,000 (number of $100 credit purchases per day)
* $0.15 (Apple Pay fee)
= $18,000,000 ($18 million: value of Apple Pay fees per day for ALL US credit transactions)
* 365 (days per year)
= $6,570,000,000 ($6.5 billion: value of Apple Pay fees per year based on ALL credit transactions in the US)
This is a hypothetical calculation. It is the fees Apple would receive _if_ ALL current credit transactions in the US were paid through Apple Pay. The calculation excludes credit transactions in the rest of the world, which presumably could also be substantial. And the calculation does not consider potential growth in credit transactions that might be possible if people became generally more comfortable with credit transaction security.
Congratulations, you win the math prize on MDN!
When you consider that Apple Pay could easily spread across the globe over the next decade, this is potentially enormous for Apple and AAPL.
If they get 10% of the transaction that’s $1.6 B per quarter.
The needle will move. Let’s say they make $2B in fees during FY2015. Expenses are probably low, so let’s say GM is 90 percent and taxes are 25 percent. Profit should equal around $1.35B and with 6 billion shares this calculates to $.225 a share. Multiply this by a 16 P/E and it’s worth $3.6 a share. This is currently not priced into the stock because this info just became public a few hours ago. In addition, I’m sure these numbers in the U.S. will grow over the next few years.
There is a story that was published today or yesterday which claims Apple is in negotiations with a bank in China. It is possible Apple Pay could spread around the globe fairly rapidly and substantially increase the bottom line.
I’m amazed how far behind the US consumer banking system is. Chip and pin has been common place in canada for several years and was required in England when I lived there 9 years ago. 9 years!
Good to see Canada in the lead, but quit with the ‘eh’ and learn how to pronounce ‘ou’ words.
Also, what’s with their being super polite, loving Tim Hortons, and being scared of the dark?
Hey, hey, how many Canadians does it take to change a lightbulb? None! They all stand around going, “Oh no, the light’s out, eh? I’m scared!”
… I miss How I Met Your Mother …
In terms of communication networks, Canada has usually been pretty good at rolling out national systems.
Interac has been a nationwide system for all bank cards since 1984 and payment by cheque at any store is unheard of. In the late 80s, most retailers and restaurants accepted interac.
So I waz driving doon to Seattle, eh.
And the car just went up and died, eh.
So I’z phoned the AAA eh.
Yes, you surely live in the darkness my North-American friends, concerning what other countries have been doing, and even thinking 🙂 No wonder, your news seem to be only concerning yourselves, like a whole nation (US especially) taking a selfie of itself all the time not minding or knowing about others. That’s kind of cute behavior but at the same time rather naive.
I lived in Sweden in the 90’s, then the Swedes used PIN all the time! That’s over 20 years ago! I think the french were even earlier on that.
French-speaking people surrender faster.
BS, you tasteless prick. The French never surrendered, they formed the Resistance.
I can only assume your narrow mindedness refers to WW2. Against the blitzkreig, no western European nation was able to stop the first German advance, and France was nowhere near the first to fall.
However, every European nation, notably the French, immediately developed underground resistance efforts that provided intel and sabotage so that the Nazis were relatively quickly defeated. From the annexation of Austria until the fall of Berlin was less than a decade — quite a difference from today’s endless warmongering.
Screw you and your antiquated bible, which is as arrogant and twisted as your version of modern history.
This is just the beginning. The camel just stuck his nose in the tent.
If Apple becomes a “credit card” perveyor, it can keep the 1.5% instead of the .15 %.
Apple plans multi-year so I bet it has plans for the next 5 years which includes applePay globally, and then the only way forward is for Apple do what the likes of Paypal is doing and I believe Amazon is planning too issue it’s own credit card.
WTF does that mean?
It’s an expression. The idea is that once the camel gets its nose inside the tent it’s coming all the way in whether you like it or not.
why the hell doesn’t apple just use the cash pile to finance its own credit card bigger than visa master card or Amex what the heck are the billions in the bank for. then they could get a lot more per transaction and still be giving apple customers a better deal than the banks
Apple works methodically when they do anything, anything at all… i wouldn’t be surprised in 5 years if Apple doesn’t have it’s own financial institutions. They could literally use the money they make only from the ApplePay to do it!
Banks have to be built on trust and time and are a completely different ball of wax. It’s just just about opening up a bank.
I could see them purchasing a Bank if they really wanted into the industry.
I’ll take a wild guess and say that Apple would come under far more scrutiny as a competitor to Visa or Amex and have to reveal far more about itself.
What it is doing is acting as a virtual card acquirer on behalf of VISA, MC and a couple of hundred banks which is a nice place to be.
Apple doesn’t have to compete with anyone or indeed everyone; sometimes a slightly disruptive co-operation is a better route to achieving a comparable outcome.
The competition here are the card acquirer networks – like WorldPay – who may have to rethink their strategy going forward, especially on casual purchases and entities like Google and PayPal.
Many, many years ago when MSFT was trying to figure out how it was going to make money from the Internet, Gates put forward the concept that MSFT would develop something very like Apple Pay and make a fraction of a cent from a huge volume of transactions.
Like many things at MSFT however, that vision never came to anything largely because a) MSFT never developed an ecosystem like iOS, b) who would ever trust MSFT to be a ‘partner’ that wouldn’t try to come and steal your lunch money at some point in the future and c) what sort of frickin’ moron would trust MSFT to design and implement a secure e-wallet.
Wouldn’t that take forever to get established? i.e. Here in Australia a vast number of merchants STILL do not accept American Express. Granted they have higher fees, even so the uptake with Apple Pay could take a long time to be useful.
The way they have set it up – if we (as a small retailer) are able to accept M/C or Visa, we can also accept Apple Pay. This give the end user of the iPhone immediate acceptance at a vast range of retailers while they assess / work on the adoption rate of their own card – if worthwhile.
WRT banking, “PC guys aren’t going to just walk in…”
Or are they?
ApplePay is inherently more secure than using a physical card. Here’s why. Credit card number/information is not stored anywhere on your iPhone. Not. Stored. Anywhere. When you take a picture of one of your credit cards, the information on it is used to communicate with your card provider, which then issues a token representing that card. The token is sent back to your iPhone. The token is what is stored in the secure element on the iPhone along with just the generic type of card it is associated with (VISA, MasterCard, whatever) and the credit information and image of your actual credit card are then deleted.
None of your sensitive credit card information is stored on your iPhone.
When you use ApplePay, the tokens in your iPhone are accessed to present a list of the cards you have available to pay with. Just generic images of each card. You pick one, or, if you’ve established a default and that’s the one you intend to pay with, you can skip that step. You hold your phone near the NFC reader and touch the Touch ID on the phone. The phone generates a one-time use payment token from the token representing your selected credit card. This one-time use payment token, using Public Key encryption technology, can be decrypted only by the credit card issuer, which holds the private key used to decrypt it. Presumably, the public key token incorporates the exact amount of the charge and the business being credited with the charge. That way, even if this token is intercepted, it cannot be used twice and can be used by a thief only to charge the purchase you are standing at the register and in physical possession of. No way for a thief to gain from the use of the intercepted information.
None of your sensitive credit card information is transmitted during a transaction.
After the charge has been approved by the card issuer/bank, a confirmation of such is sent back to the business so that you are allowed to complete your transaction at the register, receive a receipt and leave the business with your goods/services. The business retains only a record of which type of card was used to complete the transaction, not even your name or card number, etc. If the business’ systems are later compromised, such as what occurred with Home Depot, Target, others, card information may be stolen associated with those who swiped their physical credit cards at the same registers you and other ApplePay users used, but your card information and that of those other ApplePay users will not be stolen because it will simply never have existed in the business’ systems.
None of your sensitive credit card information is stored by any business you purchase from.
So ApplePay is inherently more secure. Your credit card information is not stored in the dozens, or hundreds, of businesses you’ve made purchases from. Can thieves still get hold of your credit card information? Of course, either by stealing the actual card from you or by breaking into your card issuer’s systems. These methods have existed and will still exist, but gone will be the days of restaurant staff lifting an imprint or, in the modern era, snapping a pic of your card with their smartphone. Gone are the days of your information being compromised due to a break in of the systems of a store at which you made one or more purchases. Gone are the days of your information being lifted by scanners secretly inserted into gas pumps, etc.
Perfectly secure? Never. Inherently more secure in several fundamental ways? Absolutely.
Edited by RadarTheKat – Yesterday at 3:41 pm
Dell gets 15 cents on every $1500 PC it sells. And that’s their margin on the high-end. The low-end earns them about 15 cents on every pallet.
Thoughts here are that Banks are in partly due to Apple Pay and partly due to the resulting much larger NFC support by retailers that may boost use by other NFC payment compliant technologies. Apple Pay will get a large chunk of CC transactions made by iPhone5 (or newer) owners that choose to use it 100% of the time (have to account for recurring payments on CC that are set up. Doubt Apple Pay will get any part of that). I wonder if warehouse stores like Costco will accept Apple Pay.