How the Stars are Aligned for Apple Pay

Although Apple Watch stole the spotlight, Apple Pay may have been the biggest game changer from Apple this month. Whether deliberate or not, Apple has been laying the foundation to enter this space for years. The fingerprint reader and the Passbook app hinted at their impending foray, but their 800 million credit-card linked iTunes accounts have them positioned for domination. Morgan Stanley estimates that the majority of iPhone users in the U.S. have iPhone 4S or earlier, meaning that the Apple customer base is due for an enormous upgrade cycle. Couple this with the estimated 220,000 stores in the U.S. that already accept contactless payments, and we have the ingredients of impeccable timing.

The beautiful, yet diabolical characteristic of Apple’s entrance into payments is that it already works on existing infrastructure, as if to “play nice” with the incumbents. Sure, Apple Pay will encourage seamless payments using Visa, or Mastercard etc. Sure, you can use Apple Pay with existing POS. But over time, as Apple Pay grows, the value that these players bring to the table will diminish. Why use existing rails when payments could be made between two iTunes accounts? Why use existing terminals when the same goal can be accomplished with an iPhone or iPad? What Apple has concocted is ingenious, and ultimately could eliminate the need for cards altogether.

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