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Apple’s Bite of the Card Payment Systems

Meanwhile, Apple’s mobile wallet is taking a growing chunk of card payments around the world. As the service grows, it is becoming a greater challenge to rivals like PayPal and attracting the attention of competition watchdogs. At present, Apple Pay accounts for about 5% of global card transactions and will be able to handle one in ten such payments by 2025, according to recent trend data compiled by Bernstein, a research firm. Apple is looking to grow its services division, which includes Apple Pay. The unit generated US$12.7bn in the last three months of 2019, a 17% increase from a year earlier. As far as Apple Pay is concerned, the company has plenty of seed capital,  years of experience in card transactions, and a vast customer base of iPhone users. The digital payments race is an immense opportunity, representing about $1 trillion in revenue around the world. Visa and MasterCard process more than $14 trillion of payments each year and are still growing as more transactions go online, flow through apps, and as consumers in many parts of the world use cashless often. Apple Pay makes money by taking a sliver of each transaction that runs through the app. Users can store their credit and debit cards on the wallet and use it to make contactless payments, supported by biometric security, through their phone’s near-field communication (NFC) tech. In the USA alone, contactless payments are forecast to increase to $1.5 trillion in 2024, up from $178 billion in 2019, according to Juniper Research.

The argument about competition is heating up. The other competitors, Alipay and WeChat Pay, the enormously popular Chinese payment apps, have to use QR-codes. The optical codes are read through a phone’s camera, while Apple Pay is already built into iPhones. Academics, lawyers, and executives see Apple’s control over the iPhone NFC chip as a way to block competition and make the Apple Pay wallet more popular. European officials are investigating Apple Pay again after German lawmakers passed a  measure that would require tech companies to open up their payment services interfaces, and some big European banks, such as Deutsche Bank, have reportedly decided not to support Apple’s NFC interface. Apple argues that its NFC interface is designed to ensure security against hackers and to make the user experience as smooth as possible.

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Alastair Tempest

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