Apple Pay's Long Road to Paying Off Is Getting Shorter | Mint

Apple Pay's Long Road to Paying Off Is Getting Shorter

File Photo (REUTERS)
File Photo (REUTERS)


  • Splashy new financial offerings show that the world's most valuable company is charging further into the world of money. Its ambitious plans seem to be coming to fruition at just the right time.

Apple Inc. hasn't replaced your wallet yet, but it hasn't given up trying. Its latest moves could put it much closer to success.

Chief Executive Officer Tim Cook once proclaimed that his company would “forever change the way all of us buy things." His boast was made in 2014, alongside the company's biggest product launch in years the – iPhone 6. More than eight years later, most of us are still fishing plastic cards out of our wallets or typing numbers into a form when we shop.

But the world's most valuable company hasn't given up. With the recent introduction of splashy new financial offerings – buy now-pay later and a high-yield savings account – it is charging further into the world of money. Consumer loans and retail purchases in the U.S. add up to more than $10 trillion annually – some of the few things still bigger than selling smartphones. And with the turmoil surrounding many lenders and digital payments players, Apple's ambitious plan might be ripening at just the right time.

When the iPhone 6 finally brought Apple into the market for large-screen smartphones, it seemed a natural gateway to also launch the company's first payment service, which was designed to simply require users to tap their phones on a payment terminal. But, while the device was a smash hit, driving annual iPhone unit sales volumes to a level Apple wouldn't see for another six years, Apple Pay wasn't.

Apple's performance
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Apple's performance

A limited number of merchants accepted the service at first, and iPhone users were often still required to tap a PIN onto a payment terminal. Apple Pay kept evolving, though. It became a tool for online shopping as well, enabling an iPhone, iPad, Watch or Mac user to make a purchase without fumbling to find their card number. The pandemic brought the further, temporary challenge of how to use face authentication to authorize a payment when wearing a mask; Apple has tweaked its software to accommodate that.

After years of slow burn, this past holiday season appears to have been a big one for Apple Pay. E-commerce sales in the U.S. tracked by Salesforce showed that Apple Pay transaction volume grew 62% in the 2022 holiday season versus the prior year, according to analysts at Deutsche Bank. That bumped it up to a 7% share of all the e-commerce sales it tracked. Though that is still only single digits, the move was enough to get investors' attention across the payments industry.

“Apple Pay hit that inflection point of consumer habituation and merchant adoption," says Bernstein analyst Harshita Rawat.

Mobile and web checkouts are a crowded landscape, with buttons from PayPal, Amazon, Google, Shopify, Meta and others vying for clicks. Ms. Rawat estimates that Apple Pay could potentially be able to be used for about 30% of e-commerce payments, with a low-double-digit share realistic over the next three to five years.

E-commerce retail sales as a percent of total retail sales, quarterly.
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E-commerce retail sales as a percent of total retail sales, quarterly.

Meanwhile, Apple has quietly built a formidable presence in the physical realm – traditionally a huge challenge for online payments players. By one measure, Apple Pay represented about half of all payments made with a smartphone wallet app in stores, almost triple the share of the next player, Google Pay, according to a survey of U.S. consumers conducted last June by Pymnts, a payments data, news and analysis firm.

Still, that only amounted to about 3 cents out of every dollar spent in-store in Pymnts's survey. In stores, Apple is competing not only against good old-fashioned card swipes and cash, but also against so-called contactless cards that, like a mobile phone, can be “tapped" to pay. But the opportunity in-store is huge: E-commerce made up less than 15% of U.S. retail sales in the fourth quarter, according to U.S. Department of Commerce figures.

“The holy grail for digital wallets is the ability to dominate both physical purchases and e-commerce," says Deutsche Bank analyst Bryan Keane.

Apple's new features could help that happen. Payments companies have long sought to develop “super apps" that bring together their finance offerings with shopping and other services to drive more frequent engagement and encourage the habit of using them. Apple is arguably aiming to move in the other direction – starting with users' eyeballs then adding payments and other financial tools.

The company earlier this week launched a savings account for holders of its Goldman Sachs-issued credit card with a 4.15% annual percentage yield. Apple Card users who pay with Apple Pay get 2% or 3% cash back rewards, which can be directed into the savings account. In its initial rollout, Apple Pay Later – buy now, pay later – split-payment offering is going to be available for online and in-app purchases in the U.S. Were it ever to become available for in-store taps, it could introduce additional competition for card taps and swipes. And the business seems to be an especially attractive one for Apple: People who can afford the most expensive phones are likely an attractive population to extend credit to.

Payments are still a very small slice of Apple's gigantic pie. The service generates revenue by charging a fee to credit-card issuers when their cards are used in an Apple Pay transaction. Analysts estimate that Apple Pay had $1.9 billion in revenue in the company's most recent fiscal year, according to consensus estimates by Visible Alpha. That is about half of 1% of the company's total revenue for the year.

With much of Apple's core hardware businesses maturing – iPhone unit sales have averaged just 2% annual growth over the past five years, according to Visible Alpha – the company's business has become more dependent on adding higher margin services to that hardware.

Tim Cook might not have been wrong – just very early.

Write to Telis Demos at and Dan Gallagher at

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