Wired
Beijing time on May 9 news, Apple Inc. because it did not open the iPhone’s “click to pay” (tap-to-pay) feature to third-party payment services was sued by the European Union for monopoly. Mark Gurman, a well-known journalist, said in his latest “Power On” column on Sunday that Apple is retaining the tap-to-pay feature for its Apple Pay service to protect its revenue.
▲ Apple Pay tap to pay
Under Apple’s current policy, third-party payment services PayPal, Square, and financial institutions such as Chase, Citi and American Express cannot launch tap-to-pay iPhone apps with their own features and interfaces. It also means that if they want to reach the iPhone user base, they have to pay up to 0.15% for every Apple Pay credit card transaction.
One of the reasons why Apple is reluctant to open up tap-to-pay functionality to third-party apps is revenue, Gurman said. Sales of Apple Pay and other financial services are now a small fraction of Apple’s services business.
He estimates that Apple Pay generates more than $1 billion in annual service fee revenue. By comparison, Apple currently earns nearly $20 billion per quarter from overall services. While $1 billion a year may seem small for Apple, it could determine whether the Services segment can meet its annual growth goals.
And, Apple’s bigger concern is future revenue. Visa said earlier this year that 20 percent of its U.S. transactions were contactless. Imagine what this ratio will look like 3, 5 or 10 years from now. If Apple allowed third-party apps to use tap-to-pay today, the current impact would likely be in the hundreds of millions of dollars. But what about in the future? Probably billions of dollars.