With an estimated USD 800 billion in payments processed annually, Apple has become a key player in the global Fintech scene
By 2022, Apple controlled an estimated US$800 billion in payments, making the American technology company a major fintech player globally, according to a new report from Flagship Advisory Partners, a boutique consultancy and mergers and acquisitions advisory firm from the Netherlands.
By 2030, this amount is projected to rise to $3.2 trillion, increasing at an annual growth rate of 19% from 2022 as the technology firm continues to expand its product portfolio.
The new paper, released on January 11, 2023, looks at Apple’s fintech ecosystem, diving into the firm’s existing products and services, ongoing projects and growth metrics.
According to the report, Apple’s mobile payment service, Apple Pay, currently stands as the company’s largest source of fintech flows, accounting for transactions worth more than USD 500 billion in 2022 and an estimated 30 billion transactions.
These calculations suggest that approximately 3% of all Visa and Mastercard (V/MC) consumer card value and 10-12% of V/MC card transactions in North America and Europe went through Apple Pay in 2022, the report claims.
A comparison with market leader PayPal reveals that Apple Pay has achieved quite impressive growth in a relatively short time. Apple Pay is less than half the size of PayPal by volume of flow, and yet the mobile wallet has been operational for just eight years, compared to 24 years for PayPal, it notes.
Introduced in 2014, Apple Pay is a mobile payment service that allows users to make payments in person, in iOS apps and online. The service has increased in popularity both at the physical point of sale (POS) and online. By early 2022, the firm claimed that Apple Pay had achieved a 90% penetration rate among US merchants.
Building on this momentum, Apple introduced Tap to Pay on iPhone in February 2022, making the use of the mobile wallet even easier for merchants.
Tap to Pay, which allows businesses to accept Apple Pay, contactless credit and debit cards and other digital wallets with just an iPhone and no additional hardware, has already gained support from payment platforms Adyen, Square and Stripe, with more expected to come.
Flagship Advisory Partners has positive expectations for the growth of Tap to Pay, estimating more than USD 60 billion in payments via the POS software by 2030.
Apple Tap to Pay illustration, Source: Apple
After Apple Pay, the second largest source of fintech flows is the payments that Apple itself receives as a merchant through its own sales channels. These include the Apple stores, Apple.com, Apple’s music, TV and video channels, as well as the App Store, the report says.
An estimated $242 billion worth of transactions were reported in 2022, with the App Store accounting for most of the $100 billion total and generating $25 billion in revenue for the company.
Apple’s Estimated Fintech Ecosystem Volume Flows by Product and Services (2023), Source: Flagship Advisory Partners, January 2023
Expand the consumer fintech business
In the past couple of years, Apple has moved deeper into financial services, a development evidenced by the firm’s new product announcements, the report notes.
In 2017, the company launched Apple Cash, a solution that allows users in the US to send and receive money, maintain an Apple Cash balance and easily transfer money back to a bank account.
This was followed in 2019 by the introduction of the Apple Card, a credit card created by Apple and issued by Goldman Sachs. The card is primarily designed to be used with Apple Pay on Apple devices such as iPhone, iPad, Apple Watch or Mac. Currently, it is only available in the US, with 6.7 million US cardholders in early 2022.
Apple Card dashboard, Source: Apple, January 2023
Other consumer fintech products are in the works, including Apple Pay Later, a buy now pay later (BNPL) solution that will allow users in the US to spread the cost of a purchase into four payments over six weeks, without paying interest or fees; and the Apple Savings account, a “high-yield” interest-bearing savings account that will be managed by Goldman Sachs.
Apple’s Fintech Development Timeline (2023, Select Key Events), Source: Flagship Advisory Partners, January 2023
This development indicates that the technology firm is working to expand its portfolio of fintech products for consumers, the Flagship Advisory Partners report said. It notes that while volumes coming from Apple Card and Apple Cash remain modest with an estimated US$30 billion in transactions in 2022, this total could grow to US$350 billion by 2030 as Apple continues to launch new consumer fintech products.
Looking at Apple’s fintech operating model, the report notes that the firm has so far relied on a number of partners, including Goldman Sachs, JP Morgan Chase as well as Visa and Mastercard, to process payments and offer Apple-branded fintech products to consumers.
While evidence suggests that Apple may be looking to reduce its reliance on third-party and banking partners, it is unlikely that the firm will take over all or most of the value chain roles provided by partners today, Flagship Advisory Partners said. This is because the collateral damage of becoming a fully licensed bank would be too great, compared to working with strong partners offering increasingly sophisticated banking-as-a-service (BaaS) propositions, it said.
In addition to its consumer fintech line, Apple has also been working to expand its digital identity offerings. Apple Wallet, an app that stores users’ credit and debit cards, loyalty and rewards cards, as well as identification, saw several developments in 2022, including the launch of driver’s license and government identity documentation (ID) on the app. Currently, three US states offer driver’s licenses and state IDs in Apple Wallet: Arizona, Colorado, and Maryland.
Featured Image Credit: Edited from Unsplash
