He predicted it would take 6 years for Apple Pay to grow into a $1 billion business

Six years later, Horace Dediu says it may take closer to 10.

From Dediu’s “Apple Pay’s Pay Day” posted on Asymco Friday morning:

IN a recent release, Apple reported that “more than 90% of stores in the US, 85% of stores in the UK, and 99% of stores in Australia accept Apple Pay.” This is encouraging but a very small view for the global Apple Pay picture. How can we assess where Apple Pay is and how do we even measure success? My expectation six years ago was that Apple Pay would be a “$1 billion business” by 2020. Now that 2020 has ended, how was my six year prediction?…

My expectation six years ago … was based on a take rate of 15 basis points ($15/$10,000 in transactional value). Juniper Research, which regularly examines payment transaction markets, now expects that Apple will see global Apple Pay transactions of $686 billion by 2024.

At that 15 basis point rate it amounts to $1.03 billion. Thus this particular research suggests that I was off by 4 years, making the $1 billion pay day a 10 year target rather than six.

But maybe that is no fault of Apple’s. The transaction volume is also equivalent to 52% of the proximity mobile payment market. Half the addressable payment market is a pretty good market share for a company holding 25% of the smartphone user base.

My take: I like an analyst who will admit he or she was wrong.

19 Comments

  1. Fred Stein said:
    Big fan of Horace. Hat’s off for the bold vision. And yes, with 52%, Apple wins.

    It’s one more area, like Apple Watch or AirPods, where Apple arrived late, did it right, redefined the category, and left the rest of the category as fragmented, low ROI dump.

    5
    January 15, 2021
  2. Robert Paul Leitao said:
    Us humans are creatures of habit. It can take awhile for people to migrate to new approaches or practices for payment. At my local Costco gas station they recently changed the card readers. Customers now have to leave their chip card in the terminal for more than a second. I’ve seen people seemingly dumbstruck at the pump. In response to the change there are now instructions in big lettering by each pump. Nothing bad about this, but human nature does make it challenging for many of us to change approaches and routines quickly. Not everyone is an iPhone or Apple Watch user. There’s nothing wrong with Apple Pay or the technology. Humans are just interesting creatures.

    3
    January 15, 2021
    • Bart Yee said:
      I also noticed this change. Having a combined Costco membership and credit card, I can leave the card in and choose “use Credit Card” now. However, I was told the new readers can also accept Apple Pay (like inside Costco). I will do that now even though it’s tied to exactly the same credit card so that Costco sees offering Apple Pay acceptance is beneficial to my member relationship. I am waiting to see if their pumps’ optical or chip scanner can scan my Costco membership card or QR code (via Costco App), then accept Apple Pay via my Apple Watch, leading to truly contactless transaction other than me pumping the gas with gloves hands.

      I have patronized more Apple Pay merchants and thanked them for offering it. Home Depot, Lowe’s and Walmart / Sam’s Club remain notable holdouts from the old CurrentC / Merchant Exchange (MCX) debacle of the early 2010’s.

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      January 15, 2021
  3. David Emery said:
    One significant detractor for ApplePay these days is mask requirements. If you have a Face ID phone, and you haven’t trained it for your face with a mask, that’s a strong dis-incentive to use ApplePay these days. (I’m too lazy, so I just pull out the old credit card and jam it in the machine….)

    The other detractor was the resistance by some major store chains to ApplePay, because they were trying to push their alternative.

    I bet this summer ApplePay usage takes a significant jump, once mask mandates are gone.

    0
    January 15, 2021
    • Robert Paul Leitao said:
      David: One decided benefit of using Apple Pay is the near-immediate 2% cash back without restrictions. Yes. Using the pass code due to a mask is another step, but that’s not an issue for those who are shopping online from their home. I’m surprised by the number of online merchants now accepting Apple Pay. The ability to use Apple Pay does influence my decisions on where to shop. Having to be concerned with credit card points and restrictions on usage is becoming much more tedious by comparison.

      1
      January 15, 2021
      • David Emery said:
        That 2% is only if it’s an Apple credit card, right?

        And not everyone wants to wear a watch. I haven’t worn one in ~40 years.

        0
        January 15, 2021
        • Robert Paul Leitao said:
          David: You don’t have the Goldman Sachs Apple Card???!!!
          I know Goldman Sachs may not be a popular name in these parts (specific to today, of course), but that 2% cash back nearly instantaneously by the combination of Apple Pay and the Apple Card is almost irresistible! Yes. I do have other cards linked, but what’s the point? I actually use my iPhone for Apple Pay more often than my Apple Watch. Purchasing online is mostly when I’m prompted to use my watch.

          0
          January 15, 2021
          • David Emery said:
            No Apple Card. No watch (of any kind). And I’ve never tried Siri.

            Guess I’m just not with the program 🙂 🙂

            0
            January 15, 2021
            • Bart Yee said:
              @Robert Beauty of using Apple Watch for Apple Pay in retail purchases is once you entered your passcode when putting it on, it’s good till you take it off. Watch’s Apple Pay functions then even without iPhone present meaning you could leave iPhone and credit card behind and still transact. 2 side button taps, place phone on reader, done! At Costco, I set up all items barcode up to be hand scanned, no need to take out of cart, Apple Pay used – result, even w/full cart I get out in under 1 minute.

              1
              January 15, 2021
              • Robert Paul Leitao said:
                Bart: I gotta try that at Costco at least once!

                1
                January 16, 2021
            • Bart Yee said:
              No offense, I say we at PED 3.0 fund an Apple Watch 6 for brother David, say an Aluminum Silver or Space Gray 44mm with Sport Loop or base band of choice, load it up with activity, fitness, heartbeat/ECG/pulse ox apps that fit his lifestyle, and let him set up Apple Pay with whatever cards he chooses. He can connect Podcasts, Music, News, etc. up to him to consider any cover or protector. I’m sure he has plenty of fast chargers (I recommend Anker mulitport chargers).

              I would only ask that he use it for 60 days or till next AAPL dividend or earnings call. If at that time it doesn’t wow David into keeping it (and any dividend or rise from earnings essentially pays for it), I will personally purchase it from him. My Apple Watch 4 is getting fairly scratched up from my clumsiness so win-win either way! What say we?

              1
              January 15, 2021
              • Kirk DeBernardi said:
                @ Bart Yee —

                I’m game if others are.

                (sets somewhat of an awkward precedent though)

                1
                January 16, 2021
            • Robert Paul Leitao said:
              David: You really have to try the Apple Pay, Apple Card combo. It’s like super-sized good stuff without the calories. You don’t get excess calories just cash back! I used it this evening for a big purchase. Within a few seconds of double-clicking the side button on the iPhone to authorize the purchase, a notice comes right across your screen and you can confirm the purchase is accurate and complete in the Wallet app! Then you just wait with a kind of gleeful anticipation for the posting of the 2% cash back straight to your cash card! It takes away the pain of purchasing a big ticket item. Well.. Maybe, kind of, 2% of it at least anyway.

              1
              January 16, 2021
        • Kirk DeBernardi said:
          @ David Emery —

          You don’t know what your missing.

          When the  WATCH first debuted, I was tickled by the reaction of some (obviously younger) first-time watch users who were delighted about how it was so nice to not have to dig into their pocket to look at the time on their iPhone.

          As to the Apple Pay functionality — to me it’s the second best reason to even have an  WATCH. The first being to tell time.

          All the rest is resourceful value-add.

          1
          January 16, 2021
          • David Emery said:
            I don’t like something hanging on my wrist…

            But if someone wants to loan me one for 90 days, I’ll accept the challenge 🙂

            0
            January 17, 2021
    • Bob Goldstein said:
      I always use my Apple Watch for payments. It’s been so long that I have used my phone that I don’t even remember how to do it

      4
      January 15, 2021
      • Jerry Doyle said:
        @Bob Goldstein: I always pay with the Watch. In fact, I do more daily and use more daily my Watch than my iPhone. The Watch pretty much (as the Gateway into the iOS) has usurped many of my previous iPhone activities. When making a purchase a mask is no problem with the Watch. Double click the sidebar and “Voila!” Hell, a team of wild horses couldn’t pull me from my Watch.

        4
        January 15, 2021
  4. Jerry Doyle said:
    I use my Apple Wallet for 99% purchases but infrequently use my Apple GS MC when doing so. Whether Apple gets any remuneration from my using the Wallet I do not know, and no one has addressed that issue. I know that Apple gets remuneration when I use the Wallet AND my Apple Pay GS MC. Apple gets a percentage. Do they, though, get anything from my using the Apple Wallet for initiating the digital pay through another credit card?

    Why do I not always use the Apple GS MC? It is extremely difficult to sever ties with a credit card company with whom you have been a customer for years; in my case for decades. One’s credit score is predicated on the length of credit relationship one has with a card company. So, to break my relationship with my credit card company with whom I have been associated with for over forty years would have an adverse impact on my credit score. (My credit score ranges between 834 and 850.) Conversely, when I added Apple’s GS MC, that addition pulled my credit score down some points and will keep my credit score down those number of points for the two year period.

    Continue….

    0
    January 15, 2021
  5. Jerry Doyle said:
    Continued….

    The Apple GS MC gives a 2% immediate payback. Nice, but that is not nice “enough.” My other card provides greater benefits, although it costs me hundreds of dollars annually. It also provides many amenities. I once was robbed in a small foreign country on the other side of the globe. No one in the town’s only bank spoke English. I used their phone to call toll free to my card company. The representative in five minutes had another card representative on the line who spoke the local language. That representative conversed with bank employees and all my troubles were addressed. When I said a goodbye “thank you” to the card representative on the other side of the globe, it is difficult to describe the relief I felt. I just wanted to give her a hug. This was decades ago before the language conversions apps available today. So, how does one walk away from such a relationship? It is very difficult.

    1
    January 15, 2021

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