Apple Pay: A semi-monopoly on the real killer app

“Apple (NASDAQ:AAPL) just announced its new iPhone 6 models and the Apple Watch,” J. M. Manness writes for Seeking Alpha. “Apple also announced what to my mind is the real killer app of the mobile space – Apple Pay. This is an app/service that will truly revolutionize the $13 trillion per year payments industry.”

“The savvy investor needs to understand both the import of the system and why the Apple Pay system is superior to all others and will stay that way,” Manness writes. “Apple will have a semi-monopoly on the system, and why it will always be superior to systems offered by competitors such as Google’s Android and Microsoft’s Windows Mobile.”

Manness writes, “A professional in the industry, Brian Roemmele, writes in Quora: ‘I have been studying payments for over 30 years and have tested every material payments system ever conceived. The Apple Pay experience is at the top of the pyramid of any system I have ever tested. Certainly there has been NFC in smartphones, there has never been a system where the software was native to the operating system in the manner Apple is using. Apple Pay makes all of the schemes from just about every payment startup over the last decade especially the last few years look cumbersome and almost comical in comparison.'”

Read more in the full article here.

MacDailyNews Take: As we wrote on September 10, 2014:

The market has yet to fully grasp the magnitude of Apple Pay.

[Thanks to MacDailyNews Readers “Fred Mertz” and “Dev” for the heads up.]

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23 Comments

    1. I am eagerly anticipating the security of abstracting my credit cards behind the Apple Pay system. The credit card system has been broken for decades, but the security breaches have truly become epic over the past few years. Signing your name with a stylus on a lousy plastic display is worthless. Few stores bother to ask for a photo ID (and that can easily be faked). And the “security code” printed on the back is a joke of an attempt to reduce fraud. It is printed on the card, which means that dozens or hundreds of retail workers see it every year.

      The current version of Apple Pay focuses on integrating a variety of existing payment approaches. But the next step is to begin bypassing those approaches and processing payments through the “Bank of Apple.” Even if Apple only converted 50% of its user accounts to switch from their credit cards to a Bank of Apple line of credit, it would make Apple a major player in the world.

  1. Google and Samsung will find a way to copy Apple Pay. The copy will be crappy, as their copies almost always are, but there will be some kind of copy. There has to be. Otherwise, Apple crushes them into paste.

    ——RM

    1. Google and Samsung will try to copy Pay, but Apple will have a generous head start and ALL the initial buzz and free publicity, amplified by card-issuing banks’ adoption announcements. A killer component of Pay’s implementation is the finger print scanner built into iPhone, due to Apple’s prescient purchase of Authentec, developer of the most reliable and secure finger print I.D. verification and processing technology. Users and merchants want the security and peace of mind to know that the transaction is physically authorized by the true card holder, in real time. I predict that when consumers note other restaurant customers are paying with their iPhones and not handing over their credit cards, many Android users will be attracted over to newer iPhones.

      1. Head start may not be as big as imagined since the huge portion of the Apple Pay system transaction flow uses a stanardized system to handle tokens and cryptogram.

    2. “but there will be some kind of copy.”

      I’m not sure that is necessarily so. Unlike for an operating system, a payment system can’t be so-so. I can’t imagine any appreciable acceptance of a payment system that, for example, has only one credit card on it and is accepted at only a handful of stores.

      1. I’m sure the copy will have just as many credit cards and stores on board, just like how the iTunes copies signed up all the same recording companies. The crappiness will be in the user experience, not the range of adoption.

        ——RM

    3. After reading the specifics of how Apple Pay works it appears that the only real Apple specific portion is the TouchID as cryptogram sent with the token. There is nothing stopping other OEMs say from using a similar system but replacing TouchID with the facial unlock functionality already present in 4.x Android. Kudos to Apple and all involved financial institutions in working together for the future of electronic payment.

  2. It’s good to see that Apple will reap the benefits of so much time spent conceptualizing and implementing iOS features in ways that maximize security for mobile devices.

  3. When does half a bee, half not be?

    Semi-Monopoly reminded me of “semi-carnally,” from Monty Pythons Eric the fish sketch, which ends with Eric the half a bee song.

    It actually makes a little sense.

    The Apple Pay system is so intricate to iOS and the iPhone, that only Apple can execute it the way it should be, and that’s a WIN-WIN-WIN situation for them. Soon you “have” to have an Apple device for safe and secure commerce.

    1. I think they re saying semi-monopoly due to the fact that the back-end of the system that is Apple Pay is actually standardized and available for any vendor to use. The financial industry would not have it any other way to keep options open. Outside of the iPhone system the rest of the workflow beginning at the payment terminal only requires a token and a cryptogram. As long as those conditions are fulfilled the system doesn’t care what device provided them.

  4. If it is only on the iPhone 6 it seems to be just a tiny number at this time. Even if Apple sells 20 milion in the next 12 months that is a small percent of shoppers. Walmart does not see it, Amazon and Bestbuy not interesred. eBay surely not either. I hope it is a stock mover but at this time do not see it scaling very fast.

    1. CupertinoJoe what you don’t know. Apple is close to 20 million iPhone 6’s already. Add 40+ million by end of year. A year from now there will be well over 100 million users of the service.

    2. I think it depends upon the definition of “scaling very fast”. While Apple is likely to sell over 200 million iOS devices in the next 12 months, after subtracting out other countries, and older models (although the 5 series works with Apple Watch to enable Apple Pay), you’re still looking at well over 20 million, probably closer to 50 million, and that number more than doubles the next year (as accumulated sales).

      Likewise, while there are only 220,000 merchants that will accept Apple Pay, that number is going to sky rocket over the next couple of years.

      Walmart, Amazon and BestBuy are working on their own system, but they’re going to have a very hard time competing with Apple Pay and will likely accept it sooner rather than later.

  5. I forgot the part where Apple may even sell 20 million iPhone 6 in the next twelve months. You are right apple pay is going to be very insignificant. #sarcasm#can you read or do math?

  6. Shoot, my HTG SuperUniverse 9 has had NFC payments since 1975, so welcome to my awesome party which I have been living in with such awesomeness and making payments is totally awe-mazing. Well, it would be if there was any place to accept my device, but it’s not my fault they’re so unawesome. Apple people don’t know this but any Anderiod user can simply by forging their own roms and welding in new TetraG’s–I did mine in my mom’s cellar in only like two months. Ok, if you have a job it might take a little longer, but no biggie. Plus it has ALOEVERA display with 849 pixels per micron, so suck on that explosion of awesomacity. Once I backloaded a custom compilifier to its 18-core SnatchDevil 7900, it smokes any other phone coz it cranks out 38 trillion pentaflops per nano, which is far awesomer than stock. And, it gets 3 months on a charge while running two movies simultaneously at 67fps, while playing Halo AND making video calls–at the same time—booyah!

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