Apple Pay Success?

Spin surrounding Apple Pay US equals success - hardly!

Apple Pay was launched with much fanfare in October 2014 in USA followed by the UK Canada and Australia.

Today its estimated Apple Pay US has estimated 45 million users and 6.5 million Apple Cards – see Ron Shevlins interesting pce below.

Apple claims to have 112 million i-phone users in US – that’s a cross sell of 5.8% for Apple Card, any retail banker who produced such a lousy cross sell results would be fired.

I think Apple Pay is a great case study of what not to do in payments.

The two critical success factors with any payment product are ubiquity and scale – Apple Pay has neither.

In 2014 Apple Pay was launched but could only be used by Model 6/7 phones – that exclude 75% of Apple customers – talk about a major turn off.

To make matters worse Apples timing was a disastrous – coinciding with US efforts to switch to EMV chips in 2014-15. This totally botched move resulted in mass confusion among consumers about card use and what pos terminals to use. Don’t take my word for it read this pce.

https://qz.com/717876/the-chip-card-transition-in-the-us-has-been-a-disaster/

Apple could easily have launched Apple Pay in Europe which has both Chip and PIN a much better infrastructure than the 'half arsed' US adoption of just chip. The deep impacts of this botched roll out still linger in the USA today.

This explains why Apple Pay is in only 71 countries out of 224 and its biggest penetration is Europe with 56 countries with estimated 50 million users outside the USA.

Apple Pay is a good example of the 2nd generation mobile product which is performing poorly.

Mobile wallets have been totally unsuccessful in building critical mass quickly in developed markets. Attempts made by banks, card issuers, Google, Apple, Microsoft, Amazon, Visa, MasterCard, Amex, Telco joint ventures include WPS in Canada and ISIS (rebranded Softcard in 2014) in USA all have been resounding failures.

The US retail payment market is huge with the most ‘recent’ official figures US Federal Reserve 2018 figures: total payments of US$97 Trillion including US$64 Trillion in ACH and US$25 Trillion in cheques (checks), credit cards US$3.98 Trillion, with debit cards US$2.75 Trillion (2020 estimates total payments reaching US$105 Trillion).

USA has 642 million credit cards and 320 million debit cards while Apple Pay has 6.5 million users!

Zelle, Venmo, PayPal Cash, Square Cash and Dwolla are all 3rd generation US P2P transfer apps on smart phones primarily aimed at 15-35 year olds and superior technology to wallets.

By contract compare Apple pay with China's mobile payment market, the world’s largest reaching US$51.7 Trillion in 2020, from US$81 billion in 2012.

 AliPay has 1.2 billion active users globally and TenPay is in partnership with WeChat -- WeChat has 1.3 billion active global users 45% using payments. These two platforms share 85% of the mobile market and now threaten the government owned payment card China Union Pay.

Key to the initial rapid development and growth is Nov 11th ‘Singles Day’, which is a rebranding of Batchelor’s Day, a 90's student tradition – Alibaba sales for one day in 2020 totalled US$74.1 Billion with weeks total US$155 billion (US Black Friday weekend totalled 58 billion).

China mobile has also expanded overseas, AliPay is in 38 countries and WeChat in 27. Chinese mobile payments use QR codes, this is currently not standard at point of sale globally - there are some concerns about the security of QR codes.

Chinese regulators have recently moved to challenge the rapid growth, ordering new rules and also investigating anti-competitive, antitrust behaviour – this is a wake-up call for other regulators, it is much easier to create and enforce rules early rather than trying to ‘unscramble the eggs’ later.

So, don’t try and convince me that 6.5 million Apple Pay users in the US is a big deal – it’s not!

Apple Card Grows To 6.4 Million Cardholders Thanks To Women

FORBES Ron Shevlin Senior Contributor Fintech May 4th 2021

In March 2020, I reported that there were 3.1 million Apple Card credit cardholders in the US (based on a January 2020 consumer survey from Cornerstone Advisors).

How did the card, which was launched in August 2019, do throughout 2020? Pretty well, it turns out.

According to a Cornerstone Advisors survey from December 2020, the number of Apple Card customers more than doubled over the course of the year. Cornerstone now estimates that 6.4 million Americans are Apple Card holders.

Who Has an Apple Card?

The demographics of Apple Card customers didn’t change significantly throughout 2020. Consumers in their 20s and 30s comprise 70% of Apple Card customers (as a point of reference, they represent 44% of all credit cardholders).

Apple did make some gains among Baby Boomers, however. At the beginning of 2020, Boomers accounted for just 3% of Apple Card holders—by the end of the year that percentage had more than doubled to 8%.

In addition, Apple made significant gains throughout 2020 in getting the Apple Card into the hands of women. At the start of the year, just 25% of cardholders were women. By December that percentage had grown to 42%.

This means that 80% of the new Apple Card customers that came on board in 2020 were women.

This is quite an accomplishment in light of the allegations brought against Apple in late 2019 that the company’s credit limit policies were sexist and that it discriminated against women.

Who’s Apple Card Competing With?

Not surprisingly, many Apple Card holders also a credit card from the leading issuers like American Express, Bank of America, and Capital One. The biggest competition for driving purchases to the Apple Card may not come from any of the major issuers, however.

Roughly half of all Apple Card holders also have a credit card from Amazon and PayPal, both of whom hold strong positions in eCommerce payments.

What’s Apple Doing to Build the Apple Card Business?

After making a big splash with its launch of the Apple Card, the company has been more subdued in its subsequent marketing efforts.

In late 2020, without any fanfare, Apple launched a web portal to take applications for the Apple Card. Prospective cardholders can use the site to determine if they’ll be approved (with no impact to their credit score) and apply for the Apple Card using their Apple ID. According to 9t05Mac:

“The ability to apply for Apple Card on the web comes after Apple launched a new web portal for paying Apple Card balances online in July. At the time, this was a notable expansion because Apple Card featured no web access, or access outside the Wallet app at all, when it first debuted.”

More recently, it announced Apple Card Family, which enables cardholders to share their Apple Card with other family members via iCloud Family Sharing. 9to5Mac reported that Apple Card owners can:

“Invite other people to share their card and track everyone’s spending on the Wallet app. The card owner can set a spending limit for each invited user. Once this feature is available, Apple Card can be shared with family members who are 13 or older, and there will be dedicated options for parents to control their children’s spending.”

The Outlook For the Apple Card

Established credit card issuers compete on rewards (who can offer the most, tailored to cardholders’ preferences) or interest rate (for cardholders who typically revolve their card balances). Apple’s strategy is different.

Apple is competing on ecosystem. 

Instead of offering 3% (or whatever) on travel, restaurants, groceries—like the rest of the market—Apple is offering 3% back on spending with selected partners (Uber, Uber Eats, T-Mobile).

And by providing rewards in the form of Apple Pay funds, it helps to fuel the volume of those payments.

No other issuer in the market can pursue that strategy.

And unlike other issuers, who offer different cards targeted at different segments of the market, Apple has gained a toehold with two very different segments—the low end and the high end—with a single card.

The concentration of Apple Card holders among the Gen Z and Millennial segments may be a shortcoming for other card issuers, but it’s an advantage for Apple.

The Coming Credit Card Boom

Predictions of the death (or decline) of credit cards grow louder with every dip in the economy. The doomsayers always ignore consumers’ changing behaviors—and their historically unchanging attitudes.

Among consumers with just one credit card, about six in 10 pay off the full balance monthly. Surprisingly, that percentage is roughly even across the generations.

In 2014, not long after the Motley Fool article was published, I correctly predicted a credit card boom, arguing that Millennials would fuel a five-year growth spurt in credit card ownership and usage.

The emerging number of Gen Zers, the quest for rewards, and the launch of new credit building cards will combine to not just keep credit cards afloat, but drive them past debit cards throughout this decade.

Six years later, it’s the Gen Zers turn to drive the credit card rocket ship.

In 2016, a Bankrate survey found that less than a third of Millennials had a credit card. CNN quoted one expert as saying “"Millennials have been stigmatized by debt."

According to Cornerstone Advisors most recent study, two-thirds of Millennials now have at least one credit card, and 40% have two or more.

So much for being stigmatized.

Of the roughly 22 million Gen Zers between 21 and 25 years old, 57% have at least one credit card, with 25% holding two or more.

That’s a lot of room for credit card growth.

And that will give Apple time to continue to build out its ecosystem and pose a formidable threat to the big issuers in the market.