Why Apple Pay isn’t making Apple much money

Posted: 2 May 2016 7:06 am

Despite launching across the world, revenues from Apple Pay may not amount to much, as Swinburne University's Steve Worthington explains.


The news came in the same week Apple brokered a deal with Australian bank ANZ to enable ANZ's five million customers to use Apple Pay.



But when Apple Pay arrived in Australia in November 2015 in a partnership with American Express, the major Australian banks baulked at Apple Pay's suggested 0.15% fee. Merchant service fees are much lower in Australia than in the US. The proposed fee would mean giving Apple 12 cents of the average 80 cents that most banks get for every $100's worth of transactions they process on their MasterCard and Visa credit cards. ANZ did not disclose the terms of the deal they had struck with Apple, but as ANZ's debit cards are also part of the deal with Apple Pay, ANZ may have negotiated a flat fee for each debit transaction, rather than a percentage fee of the value.

Besides Australia, Apple Pay has also been launched in 2015 in Canada, China, Singapore and the United Kingdom. The Australian market is particularly attractive as it is a world leader in the adoption of contactless "tap and go" technology, plus the $100 cap on such transactions is the highest in the world. Australians can and enthusiastically do use their credit and debit cards to tap and pay and this ready acceptance of new payment technology has seen Apple's rivals, such as Google, plan to launch Android Pay in Australia in 2016. This year will also see the launch of Android Pay in the UK, where Android smartphones have a major or majority market share.


By the end of 2015 it is estimated that 358 million Chinese had already made purchases for goods and services via their mobile phones. The vast majority of these were through payment services from China's two biggest internet providers, Tencent and Alibaba. These domestic payment services include utility bills, gifts to friends and charities and investments, as well as the consumption of goods and services. One observer looking at the Chinese market for payment services is quoted as saying that "Apple Pay is a solution in need of a problem". To add to the challenges for Apple Pay in China, Samsung Pay will soon follow Apple Pay into China, along with LGPay. And more competition will emerge from the Chinese handset manufacturers, Huawei and Xiaomi, which have both recently rolled out Near Field Communications (NFC) based payment services.




"The lack of privacy policies applied by Facebook means that I would never create an account with them."


"Considering the inherent security issues surrounding the use of Facebook, I would not associate it with "my account with a financial organisation".


The ConversationSteve Worthington is Adjunct Professor at Swinburne University of Technology. This article was originally published on The Conversation. Read the original article.

Picture: Denys Prykhodov / Shutterstock.com

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