Apple Inc. said its Apple Pay service, announced in September and seen as a rival to PayPal and Google Inc., already accounts for $2 of every $3 of purchases using contactless mobile-phone payments across the three major credit-card networks.
Apple Pay is being implemented by 750 banks and credit unions and numerous merchants, the Cupertino, California-based company said Tuesday during its earnings call. The feature is also being implemented for uses ranging from laundromats to vending machines to parking meters.
“With all of this momentum, we are more convinced than ever that 2015 will be the year of Apple Pay,” Chief Executive Officer Tim Cook said during the call.
The company is targeting a market that in the U.S. alone is projected to jump to $142 billion in 2019 from $52 billion last year, according to Forrester Research Inc. Apple Pay joined the competition as retailers are upgrading cash registers to be more secure and ready to receive wireless transactions.
Apple Pay is “doing exceptionally well,” Steve Weinstein, an analyst at ITG Investment Research Inc., said in an interview before the earnings. “Once somebody uses it, it becomes a little over 5 percent of transactions that they were doing. It’s a lot. It’s really surprising, because you can’t even use Apple Pay in that many locations.”
Apple’s service has a long way to go against PayPal. In November, Apple Pay accounted for 1 percent of digital payment dollars spent, according to ITG Investment Research. PayPal, which has been around for 17 years and is being spun off by EBay Inc., had 78 percent, and Google Wallet, which debuted in 2011, had 4 percent.
“PayPal has more than 162 million active digital wallets and securely processed $46 billion in mobile payments last year,” Jennifer Hakes, a spokeswoman, said in an e-mail.
Cook said in October that more than 1 million Apple Pay activations occurred in the first 72 hours.
The service works on the new iPhone 6 and the Apple Watch, which the company plans to begin shipping in April. Users pay for purchases by holding a device near a cash-register reader with their finger on the Touch ID biometric sensor. By combining existing technologies in a package of hardware, software and services, Apple is betting it can further cement its products into the daily fabric of consumers’ lives.
Twenty percent to 30 percent of people who buy the new iPhones activate Apple Pay, Weinstein said. A smaller percentage uses the service regularly.
“It seems that Apple Pay was a motivating factor for people buying the iPhone,” Nick Holland, an analyst at financial-services consultant Javelin Strategy & Research, said in an interview. A “double-digit” percentage of about 2,000 consumers Javelin surveyed last year after the service debuted said Apple Pay was part of the reason for their decision to buy a new Apple device.
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SOURCE: Businessweek | Olga Kharif