How Big Could ApplePay Be; Is 2015 The Year Of ApplePay?

Tim Cook, Apple (AAPL) CEO  said,  “2015 will be the year of Apple Pay”, and he is probably right in terms of industry change, but that should not be translated into an expectation of important fee contribution to revenue growth. 2015 may be the year ApplePay crushes the competition, but it will not be a year where ApplePay moves the dial much on total revenue or profits directly from ApplePay fees.

ApplePay is an exciting function for iPhones, and one that is likely to be more widely adopted than competing Near Field Communication payment systems.  However, talk of it creating critical direct revenue is overblown.  By the size standards of Apple, the potential direct revenue contribution to growth is quite modest. The economic value to Apple is more likely to be in solidifying and increasing market share for iPhones. That could be huge now and later due to ApplePay as a feature benefit, not as a blockbuster direct revenue source.

Apple is huge compared to the four leading credit card companies; American Express (AXP), Visa (V), MasterCard (MA), and Discovery Financial Services (DFS).  Here are some size comparisons:

  • The revenue of the 4 largest credit card companies is about 1/3 of Apple’s revenue
  • The net income of the 4 largest credit card companies is about 40% of Apple’s
  • The market-cap of the 4 largest credit card companies is about 50% of Apple’s
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    According to one source:

    Typical Credit Card Processing Costs. If you’re looking for quick numbers, here you go: the average credit card processing cost for a retail business where cards are swiped is roughly 1.95% – 2%. The average cost for card-not-present businesses, such as online shops, is roughly 2.30% – 2.50%.

    Let’s conservatively say average credit card fees are 2%.

    Another source, said that ApplePay will receive about 0.15% of each transaction through their system.

    Here is a simplistic, but we think reasonably representative, presentation of the size of ApplePay direct fee revenue.

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    Author: Travis Esquivel

    Travis Esquivel is an engineer, passionate soccer player and full-time dad. He enjoys writing about innovation and technology from time to time.

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