Ever since the dawn of the age of computers, computing technology has slowly been integrating its way into our lives. First computers entered into the business sphere and universities, then personal homes, then laptops found their way into our backpacks and brief cases. Most recently, with the smartphone revolution, they moved into our pockets.
Now, Apple Pay is aiming to put smartphones in our wallet, or perhaps more accurately, put our wallets in our smartphones. The Apple Pay system, which looks set for a large nation-wide roll out, will allow iPhone users to essentially use their iPhones as a debit or credit card. This payment-phone integration hints at the increasing integration of smartphones into our lives.
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Apple Inc. (NASDAQ:AAPL) launched the smartphone revolution with its first iPhone model and has remained among the primary trend setters of the industry ever since. Arguably, however, Google may have determined the ultimate future trajectory of the mobile phone market with its Android operating system that is free for users and companies to use, but generates revenues through other fees.
To be clear, Apple Pay won’t be the first NFC smartphone. Google Inc (NASDAQ:GOOG) (NASDAQ:GOOGL) has already rolled out similar services, but so far adoption rates have been low. Apple, on the other hand, has already secured agreements with over 200,000 different stores, businesses, and restaurants. McDonald’s Corporation (NYSE:MCD), Panera Bread Co (NASDAQ:PNRA), and Walgreen Company (NYSE:WAG) are just some of the biggest names to announce that they’ll accept Apple Pay.
Apple Pay Biggest Announcement At September Event
The iPhone 6 may have garnered the most attention, and the Apple Watch may have raised the most eyebrows, but ultimately the biggest announcement was Apple Pay. The payment system will allow iPhone users to use their smartphone in lieu of their debit and credit cards. The system will be set up with ease of use in mind. Simply take a picture of your credit card and confirm that you’re indeed the owner, and your cards will be linked to your phone.
Importantly, Apple Pay will also offer additional security features, such as requiring biometric scans, and allowing people to avoid the risk of card skimmers (devices that steal info at the point of sale). Given the massive number of security breaches in the last few years, many consumers will be more than amenable to extra security features.
iPhone 6 Already Selling Out
In order for Apple Pay to succeed, the iPhone 6 will have to sell well as phones will have to be equipped with the NFC chip. Given the popularity of the iPhone and the loyalty of Apple fans, the success of the iPhone 6 is all but guaranteed.
Indeed, Apple’s website has already crashed due to the rush of people rushing to order the phone, and the super sized iPhone 6 Plus is already sold out. Mind you, the phone just became available for pre-order this past Friday.
Google Will Respond And Both Companies Will Benefit
Apple will not be the first company to push converting smartphones into mobile wallets. Indeed, Google tried such a system with its Google Wallet services, but it failed due to poor technology, and only partial implementation by hardware developers.
This is where Apple’s end-to-end product and service development has an obvious advantage. Apple doesn’t have to worry about drumming up hardware developer support, it can simply implement its system. By doing so, however, it will force Android hardware developers to implement a similar technology. As Google does so, the idea of smartphone.
If Google does fail to compete in the mobile payment market by improving their services, it could prove very beneficial for Apple, which could use their payment system to draw in more customers.
Money Generated Directly May Not Be That High
It should be noted that the total amount of money to be netted directly off of Apple Pay and any other services will likely be minimal. Apple will apparently make only 15 cents for every $100 dollars spent.
Card purchases are estimated to account for $7.10 trillion dollars worth of purchases in 2017, even if Apple secures 25% of this (a very high estimate), it’d generate “only” about $2.68 billion dollars. Of course, Apple won’t secure that kind of market share any time soon, if ever.
On the other hand, Apply may eventually be able to charge higher fees. Also, the profit margins for such services could turn out to be very high. Mobile payment systems could also allow Apple and Google to develop online payment systems and basic banking services to compete with Paypal and similar companies. This could end up adding even more to Apple Inc. (NASDAQ:AAPL) and Google Inc (NSADAQ:GOOG) (NASDAQ:GOOGL)’s bottom line.
Regardless, Apple Pay does point for the continued integration of smartphones into our lives. Google Wallet will also likely continue to gain steam, and soon the draw of mobile payments could be a major reason for people to upgrade their phones. Such systems will also make it more difficult for new entrants into the market.