2015 is set to be the “Year of Apple Pay” - according to Apple...
You must have been vacationing on Mars last week to not have heard how super-duper Apple has been, having the most profitable quarter of any company – ever! In a conference call to discuss the fiscal quarter, Apple CEO, Tim Cook, came off close to sounding like an Oscar winner with a downplayed, ‘Aw, shucks’ acceptance speech. When he talked about their Apple Pay solution, you would have thought that a) they invented mobile payments or b) everyone (including merchants) were just waiting for Apple to arrive before diving into a new payment experience.
Whatever. Well done them, I guess. Other folks though, have a couple more problems with Apple beyond their announced results… but we’ll get to that later.
Cook said that around $2 out of every $3 spent using contactless payments across Visa, MasterCard, and American Express are being made with Apple Pay since the service launched last October. That’s more than two-thirds of Visa, MasterCard and American Express contactless payments by value across the US. Cook revealed Apple made the largest ever quarterly profit by a public company of US$18bn and said Apple Pay was “Off to a very strong start and the feedback that we are getting from both individuals and institutions is extremely positive”. By the end of Apple Pay's first four months, it had enlisted 750 banks and credit unions. By comparison, Google Wallet had only one bank on board during its first year; to get any more participants, Google had to drastically lower its requirements for participation.
The impressive start for Apple Pay was tied to sales of 74.5 million new iPhone 6 and iPhone 6 Plus devices. Sales of the iPhone 6 Plus appeared to help boost profits and increase the iPhone’s gross profit margin, although Cook did not give a detailed breakdown of the iPhone sales recorded during the three months to the end of December 2014. Most analysts had predicted about 66 million units prior to the earnings call; the new iPhone models are the only ones supporting Apple Pay contactless payments, and they do not support Softcard or Google Wallet at the POS. That means anyone who traded an Android or Windows Phone handset for a new iPhone has most probably ditched their Google Wallet or Softcard mobile payment solution. "We see that we are appealing to new customers, with those switching from other phones to the new iPhones," Cook said. The growth was "absolutely stunning" in various global markets as well, he added.
Apple Pay also enjoys the support of merchants, Cook noted. One retailer, Panera Bread, reported that Apple Pay accounts for 80% of the mobile payment transactions it accepted, Cook added. Since using Apple Pay, Whole Foods Market has seen mobile payment activity increase by more than 400%, Cook said. It also looks as though Apple is going to heavily target the unattended POS market too. “Just today, USA Technologies announced they made Apple Pay available at about 200,000 places where everyday payments happen, including vending machines and businesses, airports and schools, colleges, universities, laundromats, and parking meters and payment kiosks in lots across the country. Point-of-sale suppliers tell us they are seeing unprecedented demand from merchants, and all of our partners and customers simply love this new service. With all this momentum in the early days, we are more convinced than ever that 2015 will be the year of Apple Pay.”
“Our customers are excited to accept Apple Pay at the self-serve locations they operate,” said Stephen P. Herbert, Chairman and Chief Executive Officer of USA Technologies. “We anticipate that the millions of consumers who frequent these locations will appreciate the convenience and security of using Apple Pay for their everyday purchases, and we believe that Apple Pay will help to drive additional sales for our customers. USA Technologies has always sought to provide convenience, security and an easy way to pay for consumers who are less and less likely to carry cash. We recognized early on the potential for mobile payment, and promoted the technology to ensure our customers were ready for this shift to occur.”
“In terms of how it evolves, I think we’re in the first inning on it, we haven’t even completed the first inning yet,” Cook continued. “There’s tons of things on our roadmap of adding functionality to it. We’re just in the US right now and so there’s tons of countries to go to and there is not a day that goes by that I don’t get notes from many businesses outside the US wanting Apple Pay. And, of course, we still have a lot of merchants left in the US but I have to tell you that, given that we launched in October, I’m actually unbelievably shocked, positively shocked, at how many merchants were able to implement Apple Pay in the heart of their holiday season. Generally, most people sort of lock down and don’t do very much but we were able to get this in a lot of different merchants and I give them a lot of credit for that. I think we’re just on the front end, but I think this is the year of Apple Pay.”
Yeah, he mentioned the whole ‘year of Apple Pay’ a lot on the call.
Apple plans to further develop its mobile wallet and expand it into other markets, Cook said. The company has "some heavy lifting to reach scale" in other countries because of the different telcos and banks involved, he added. Apple Pay's contactless payment technology at the point of sale and in-app payment capabilities are equally important, Cook added. "Geographic region will determine which one is bigger than the other," he said.
Development of the Apple Watch meanwhile was “right on schedule and we expect to begin shipping in April,” said Cook adding that the Apple Watch will operate as a payments wearable. "Expectations are very high on the Apple Watch. The number of developers writing apps for it is impressive. Developers are hard at work on apps, notifications and information summaries that we call Glances, all designed specifically for the watch’s user interface. The creativity and software innovation going on around Apple Watch is incredibly exciting and we can’t wait for our customers to experience them when Apple Watch becomes available.” Does this mean that 2015 will be the year of the Apple wearable too?
Not everyone was in a jolly mood though, last week. I did catch a piece concerning the reason why the Nexus 6 has no fingerprint sensor. It’s all Apple’s fault, according to Former Motorola CEO Dennis Woodside. Dennis Woodside was reported in an interview with the Telegraph’s Matt Warman, that Motorola - who co-developed the Nexus 6 with Google - had plans to put a fingerprint sensor on the back of the phone but that the idea was ultimately scuttled after Apple acquired fingerprint sensor maker AuthenTec in 2012. "The secret behind that is that it was supposed to be fingerprint recognition, and Apple bought the best supplier," Woodside said referring to the round groove on the back of the Nexus 6 that currently houses the Motorola logo. "So the second-best supplier was the only one available to everyone else in the industry and they weren't there yet."
Still, the groove on the back of the handset caused some to question what Motorola might have been thinking when it added the feature to the backplate. Woodside, who served as Motorola's chief executive when it was planning and building the smartphone, has finally answered that question. If the Nexus 6 had come with a fingerprint sensor, it wouldn't have been the first Android device to have one. Products such as the HTC One Max and the Samsung Galaxy S5 have come with fingerprint sensors. However, they were engineered by companies other than AuthenTec and have been roundly criticized for being unreliable - a complaint echoed by Woodside in his comments to the Telegraph. Motorola's Atrix 4G smartphone had a fingerprint reader from AuthenTec, but it was an earlier version that proved inconsistent. So now you know - it’s Apple’s fault.
There was also another sour note last week from Blackberry in an attempt to get help from the US government. According to BlackBerry CEO John Chen, “All wireless broadband customers must have the ability to access any lawful applications and content they choose, and applications/content providers must be prohibited from discriminating based on the customer’s mobile operating system.” Translation: Blackberry wants the US government to make make Blackberry apps mandatory. To make sure that the US Congress understand, Chen has written to them arguing that since Blackberry made its messenger service available to iPhone users—which he refers to as “neutrality”—the same consideration should be reciprocated. But he’s not appealing to Apple CEO Tim Cook here, he’s speaking directly to lawmakers. You can read Chen’s post on the Blackberry blog.
And it’s not just those pesky app developers themselves - it is also the service providers who use these apps (such as Netflix). “Many other applications providers similarly offer service only to iPhone and Android users. This dynamic has created a two-tiered wireless broadband ecosystem, in which iPhone and Android users are able to access far more content and applications than customers using devices running other operating systems. These are precisely the sort of discriminatory practices that neutrality advocates have criticized at the carrier level. Therefore, neutrality must be mandated at the application and content layer if we truly want a free, open and non-discriminatory internet.”
Yep. It’s not a joke. Chen wants Blackberry apps to be mandated by law. Any developer thinking about releasing content on iOS or Android would be forced by the government to develop for Blackberry and, presumably, Windows Phone and every other platform, no matter how small. It’s not fair that developers are not writing enough apps for Blackberry. Damn that Google. Damn that Apple.
But hang on a minute, it may be Apple’s year (according to Apple) but didn't Blackberry once have an entire decade all to itself?
Until next week.
Steve Atkins
Contactless Intelligence
