Insight Report: the Future of Apple Pay

Synopsis

Apple Pay is a major milestone in the evolution of mobile payments, partly as it bears what Forbes lists as the world’s most valuable brand. Apple Pay is seen by many as an inflection point, and its development over the next three to five years has the potential to shape the payments industry for decades to come. According to Apple CEO Tim Cook, Apple only ventures into areas where it can control the primary technology, which perhaps hints at Apple’s plans in the payment industry.

Apple’s current business model follows a cooperative approach, with almost all major card networks, issuers and acquirers supporting the launch of Apple Pay. EMV migration in the US plays a pivotal role in Apple Pay’s adoption. Merchants are in the process of upgrading their POS terminals to EMV, which in most cases will also comprise NFC hardware (NFC-capable terminals). These terminals only require a simple software upgrade to be activated (NFC-enabled terminals). POS vendors and acquirers are expected to offer bundled deals for merchants to simultaneously upgrade their terminals to EMV and NFC, resulting in an accelerated expansion of NFC acceptance.

However, Apple could face a challenge in terms of allocation of merchant service charges with other payment participants, especially as regulators across the world cap interchange fees. Timetric’s primary research has identified different points of view regarding the expansion of Apple Pay beyond the US. Some industry experts argue that low interchange fees outside the US, especially in Europe, will discourage Apple from entering these markets, while others stress that Apple is not expecting substantial profits from Apple Pay; the solution is mainly intended to decrease the commoditization of Apple’s products.

Summary

The report provides insights into Apple’s mobile payment solution, Apple Pay:

• It analyzes factors contributing to adoption of Apple Pay along with challenges.

• It analyzes Apple Pay’s impact on payment...