Financial Times has some interesting details about Apple Pay in a report entitled, Apple Wages War on the Wallet. Note that just clicking this link will bring up some sort of pay wall. However, if you use this Google search and click on the Financial Times link that shows up, it will let you bypass the pay wall.
The striking part is that if the details of the negotiations are true, Apple stands to earn 15 cents out of every $100 Apple Pay purchase. Now 15 cents may not sound like much, but considering the amount of sales volume Apple does right now, they stand to make quite a bit of money. For example, the App Store did $10 billion in sales in 2013. Apple Pay transactions would give Apple tens of millions of dollars in fees alone which they currently aren’t seeing. Consider Apple’s total revenues and sales done via credit cards on file, and we are talking in the hundreds of millions of additional revenue.
Now consider the transactions from retailers that will be rolling out Apple Pay point-of-sale systems. Apple is going to get this same cut from all of those purchases. And this is all only the beginning in terms of the amount of growth that is possible with Apple Pay (especially if/when Apple does open it up to non-Apple devices – something that I think they will do down the road – right now, it’s sort of like the original iPod – Apple only basically to make sure they get it all working correctly within their own eco-system first, to also use it as a selling point to sell more Apple devices first once the real life use is underway, and then extend/embrace).
I’m seriously evaluating once again as far as adding to my position on weakness (like an actual pull back into the $80’s). Apple Pay (based on the information that is coming out) reminds me of the original potential of both the iPhone and iPad announcements (as mentioned, the Watch less so as that’s going to take several iterations to bear fruit). This is something that is looking to be really transformative in the next couple of years where Apple will eventually have a very nice recurring revenue stream (but from something that doesn’t require the sort of product refresh cycle that a physical/tangible product requires). And I really don’t have to explain it any further; just look at what happened after both the iPhone and iPad in terms of their disruptiveness, and how much revenue it added.
