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Apple’s Rise as a Fintech Powerhouse


Apple’s annual iPhone upgrades, unveiled on Tuesday, have introduced a wide range of exciting hardware and software features in their new models. However, amidst the buzz surrounding these releases, one aspect that often goes unnoticed is Apple’s rise as a “fintech” powerhouse through its Apple Pay digital wallet. This growth not only poses a significant challenge to competitors in the payments industry but also provides iPhone users with compelling reasons to stay within the Apple ecosystem and continue investing in their products.

Initially launched in 2014, Apple Pay has experienced substantial growth in recent years. Serving as a digital wallet, it enables users to conveniently store credit cards, including Apple’s own co-branded card with Goldman Sachs (GS). With iPhone users able to make purchases in stores through contactless terminals and online using Apple Pay, it has become an indispensable tool.

According to estimates by MoffettNathanson analyst Lisa Ellis, Apple Pay processed an astonishing $600 billion to $700 billion in payments in 2022. Additionally, it has started capturing market share in “branded” online checkouts, where consumers view Apple Pay as a viable payment option.

While Apple Pay’s success is commendable, the same cannot be said for Apple Cash – their peer-to-peer platform and cash back service. Ellis notes that it has struggled to gain traction. Similarly, the popularity of Apple Card, which boasts 7.5 million users, has been relatively modest.

Nevertheless, Apple remains far from complacent in the payments sector or other fintech realms. Earlier this year, they introduced a high-yield savings account in partnership with Goldman Sachs, resulting in over $10 billion in deposits with an impressive 4.2% yield. These endeavors further solidify loyalty among iPhone users, enhancing their inclination to upgrade their devices for greater convenience.

Moreover, this expansion into fintech spells trouble for incumbent players in the payments industry. Apple’s growing suite of financial products, which includes Apple Pay Later and Apple Cash, is supported by the dominant mobile-device operating system in the U.S. While iPhone users can still access popular payment apps like PayPal and Venmo, provided by PayPal Holdings (PYPL), or Cash App from Block (SQ), the seamless integration of Apple’s apps with their hardware fosters stronger customer retention.

In the words of Lisa Ellis, “Apple has emerged as the most formidable Big Tech player in Payments, due to its scale, commitment, resources, and affluence of its user base.”

As of now, Apple has not responded to requests for comment on their fintech endeavors.

Apple’s Impact on Payments Companies

Apple’s growing dominance in the payments industry has had a significant negative impact on PayPal, according to industry expert Ellis. In particular, the two companies compete directly with each other through their respective branded checkout buttons. While Apple Pay has become increasingly available, PayPal has only experienced minimal growth in its branded checkout button over the past three quarters.

Similarly, Ellis predicts that Block will also face some negative consequences from Apple’s presence in the market. The two companies directly compete in the buy now, pay later sector, with Block offering Afterpay and Apple introducing Apple Pay Later.

Affirm Holdings, another player in the “buy now, pay later” space, is expected to face moderate negative pressure from Apple. However, this impact will likely be limited as long as Apple focuses primarily on their “pay-in-4” loans. Affirm’s pay-in-4 product attracts significant attention, but their longer-term loans still account for the majority of their gross merchandise volume.

In contrast, Ellis sees opportunities for collaboration between Apple and American Express. With an overlapping high-end client base, she envisions the possibility of American Express replacing Goldman Sachs as Apple’s banking partner. This potential alliance could create a powerhouse combination in the industry.

Despite the challenges faced by pure-play payment stocks, investors acknowledge Apple’s success in fintech growth. While Apple’s stock has faced recent setbacks, it has still experienced a 35% increase this year. On the other hand, PayPal’s stock is down by 11.8% and Block’s has decreased by 13.5%.

Carleton English

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