How Apple Pay NFC function can help drive revenue growth

May 16, 2019 12:43
While Apple Pay is now available in more than 30 countries and regions worldwide, it can only be used in chain shops and department stores with NFC-compatible POS devices. Photo: Bloomberg

Having been in the market for more than four years, Apple Pay has seen its usage rise in the United States and several overseas markets such as Hong Kong. However, there's still a huge room for the service to grow.

During an earnings call late last month, Apple chief executive Tim Cook said Apple Pay transaction volume more than doubled year-on-year in the fiscal quarter to March, and the company is on track to reach the target of 10 billion transactions in this calendar year.

Apple did not reveal the number of transactions for the quarter, but said it reached 1.8 billion in the three months to December. That said, volume should be around 2.7 billion each quarter to achieve the target.

There has been much speculation in the market that Apple would unlock its chipset for Apple Pay, namely the near-field communication (NFC) function, for third-party applications. In fact, the company has taken a step forward with the launch of the Apple Pay NFC sticker, which enables merchants to receive payment from Apple Pay without an NFC-compatible point of sales device.

As the NFC sticker involves minimal costs for both Apple and merchants, the move indicates that the technology giant will be aggressive in rolling out Apple Pay to small and medium-sized retailers globally and down to the local community level in a bid to lower the entry barrier for using Apple Pay.

At the TRANSACT conference in Las Vegas last week, vice president for Apple Pay Jennifer Bailey said the company will launch NFC stickers that will trigger Apple Pay for payment without the need for an app to be installed.

The sticker will unlock the user’s iPhone when the user taps on the NFC tag, and pay for something directly using Apple Pay. Apple is partnering with Bird (an electric scooter rental service), Bonobos (a clothing store) and PayByPhone (a parking mobile app) for the rollout of the service.

The advantage of using an NFC sticker or tag is that an iPhone is the only device required to make a payment. For example, a user can rent a scooter by simply tapping on the Apple Pay logo on the scooter – no need to download an app or go through a registration process.

Of course, scooter rental has yet to gain ground in Hong Kong. But iPhone owners can use Apple Pay for many other services with NFC stickers such as soft-drink vending machines in sports venues. While most of these machines only accept Octopus card for payment at the moment, it would be more convenient for consumers to buy a bottle of cold drink, for example, by simply tapping their iPhone on the vending machine.

While Apple Pay is now available in more than 30 countries and regions worldwide, it can only be used in chain shops and department stores with NFC-compatible POS devices. Most small retailers and street hawkers don't have such devices.

Therefore, NFC stickers would allow these merchants to go digital and accept mobile payments, while enabling Apple Pay to deepen its penetration in huge emerging markets such as China and India.

Apple is relying on services to maintain its revenue growth momentum as hardware sales stall. That's why Apple Pay will play an increasingly important role in the company's growth. 

As the service allows Apple to take a tiny percentage of the amount of each transaction from partner banks and card issuers, the company will increase its revenue if more merchants accept Apple Pay.

Current iPhone sales figures indicate that users are reluctant to upgrade their existing models. As such, Apple needs to squeeze out more revenue from the iPhones currently being used by consumers.

Of course, there's the subscription service announced in March, but Apple Pay also has a huge potential for the company's revenue growth from users of old iPhone models.

According to research by Flurry Analytics, about half of iPhone owners are using the iPhone 6, iPhone 6S and iPhone 7 series. All six models from the three series support NFC payment.

As such, even iPhone users who refuse to upgrade their models could still help to drive Apple's revenue growth if Apple Pay reaches more retailers and services.

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EJ Insight writer