What it is: Apple Pay is a contactless, wireless, secure payment system for Apple products.
Wall Street analysts constantly look for Apple’s next innovation. Unfortunately, these analysts either get lost in the myth of market share or they look for innovation in hardware and overlook Apple’s numerous software innovations.
On the first case, analysts keep touting Android’s huge market share while completely ignoring the far lower profit share of Android. Meanwhile, Apple has a much lower market share than Android but captures 94% of the smartphone profits. Analysts would have you believe that high market share is more desirable than high profit share.
In the second case, Apple’s innovations aren’t just limited to hardware such as the iPhone, iPad, and Apple Watch. Most of Apple’s more recent innovations are software related. Perhaps the most overlooked one is Apple Pay.
Apple Pay lets you link credit card to your Apple device (iPhone, iPad, or Apple Watch) and then pay using that credit card without actually revealing that credit card number. By keeping your credit card number secret, Apple Pay prevents others from knowing your credit card number. The fewer people who see your credit card number, the more secure that credit card number will be.
hackers currently teal thousands of credit card numbers every year by simply breaking into retailer’s computer servers. By eliminating the need to store credit card numbers on other computers, Apple Pay greatly increases security and reduces credit card fraud.
More importantly from a business perspective, every purchase made through Apple Pay gives a percentage of that sale to Apple. The reason why MasterCard and VISA are such huge companies is because they get a cut of every credit card purchase. With Apple Pay, the credit card companies still get a cut of every credit card purchase, but now they have less expense dealing with credit card fraud. That means increased profits for the credit card companies, an additional source of revenue for Apple, and far lower chances of credit card fraud for consumers.
Swiping a credit card and giving away your credit card number is now the riskiest way to shop. The safest way to shop is through Apple Pay or similar systems such as Samsung Pay or Android Pay. As Apple Pay grows in use, that just means more money going to Apple. Instead of relying on sales of hardware to make money, Apple can now rely on people’s everyday purchasing to make money as well.
Apple Pay is just one way Apple makes money through services as opposed to hardware sales. Making continuous hardware sales is a difficult way to make money. Just ask the car companies. Making money through services people use everyday is a far simpler way to make money. Just ask the credit card companies.
With Apple Pay, Apple makes their own devices more appealing with security, and creates an additional revenue stream that will only get bigger. Apple Pay helps everyone, but most of all, it helps Apple create a reliable and steadily growing source of revenue for doing very little beyond their initial work in creating and implementing Apple Pay in the first place.