Blog article
See all stories »

Apple's Surprising Role with Apple Pay: Reseller, not Innovator


Apple is recognized as one of the most innovative companies in the world.  However, with their Apple Pay offering launched last year, they are playing a surprising role:  reseller for the credit card companies.  This blog describes this current Apple Pay situation and summarizes potential innovations which could change its course in the future.


Apple Pay has been (mostly) hailed

It seems generally true that Apple Pay has impressed most observers.  Some media sites have said “Apple Pay has done more for the collective mindshare of the adoption of mobile payments than any other single product or company has done in the last five years.”

Mobile payments—the ability to pay for goods and services at physical locations with your smartphone—was certainly not an original concept from Apple.  Essentially, Apple took an existing market concept based around technology and products designed to get people to pay with their smartphones, then embraced and extended it.

It is easy to understand why banks and payment networks love Apple Pay:  it promotes additional usage of their existing debit and credit cards.  This love can be seen by the long list of U.S. bank issuers shown on the Apple Pay Support site.

That said, others have not been impressed with Apple Pay.  Harvard Business Review included an article on how:  “Apple Pay is Just a Big Giveaway to Credit Card Companies.”  In stark contrast to how Apple has been a serial innovator, the author describes how, with Apple Pay, the company unfortunately decided to become a reseller for existing credit card companies.

“By launching Apple Pay as a reseller instead of as a disruptor, Apple is helping to perpetuate a credit card payment system that is obsolete, overly expensive, and absolutely unnecessary in the present day.”  

Others, like Marc Andreesen, have said:  “Apple Pay is innovative, but in a way [it’s] very consistent with the status quo.”  Andreesen remains more bullish on Bitcoin over the long-term.


What Apple Pay innovations should be coming?

Clearly Apple Pay is the first iteration of what may become a much more innovative product offering.  Apple focused their initial Apple Pay design on the consumer—for added simplicity and security of mobile payments—while deferring other potential design centers… like merchants.

Patty Seybold’s "Outside Innovation" blog lists seven things the company should consider changing about Apple Pay.

If Apple Pay had been designed around merchant needs, then it would have enabled merchants to:

  • Integrate with their reward/loyalty programs,
  • Avoid high credit card interchange fees (by providing alternative and more cost-effective payment types), and
  • Use their existing POS terminals (vs. working only on newer NFC-enabled ones).

Over time (and after many more consumers are using iPhone 6 devices with Apple Pay), Apple could decide to become more disruptive to credit card networks by adding new payment types.  For example, direct payment from one’s bank account… which would compete with existing credit card networks.

In addition, consumers should have the ability to opt-in—on a brand-by-brand basis—to decide to share their personal information in order to receive merchant offers/savings.  We do understand the concept of “crawl, walk, run” for product development, and these innovations would add more value to both consumers and merchants. 


In closing, Apple now finds itself in uncharted waters with Apple Pay—that is, being a reseller vs. an innovator.  However, the most valuable company in the world is likely busy working to change this situation in the future.  It will just need to “think different” from the current version of Apple Pay.  Let us know what you think.




Comments: (7)

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 06 May, 2015, 16:451 like 1 like

I agree with you as I'd highlighted in my blog post Apple Puts Banks Squarely At The Center Of Mobile Payments. Loyalty, targeted offers, lower fees - I guess they're the way to go for Apple Pay. 

A Finextra member
A Finextra member 11 May, 2015, 14:141 like 1 like

Bit confused here... Apple's always been a reseller and rarely an innovator (in the sense of an inventor of something authentically new).  They didn't create the mouse, GUIs, the laptop, MP3 players or phones with touchscreens.  The original iPhone was completely made with off-the-shelf components.  What they do, better than anyone, is focus on the customer experience to remove the extraneous and make that experience as intuitive and delightful as possible. 

It's worth watching this video about their design ethos, A Thousand No's, ( if you haven't yet.  They start with what they want customers "to feel."  That's how they "think different" than everyone else and make such a splash in areas that are normally quite boring.

As for Apple Pay, let me just say that Apple doesn't care about payments at all.  Try using the words "basis points" in Cupertino and enjoy the bewildered faces.  Apple's trying to solve one problem that we all share: in the morning, we all pick up 3 things before leaving the house - keys, wallet and phone.  Apple wants that to be one thing, that's it.  As, once that's the case, you will certainly upgrade to their next insanely profitable device which has given then a war chest of over $194B in cash and made them the world's most valuable company.

They have no need to challenge the status quo in banking and payments nor to care about what merchants think.  If the customer (that is, the top 15-20% of the handset market) remains happy and upgrades, job done, IMHO.

A Finextra member
A Finextra member 11 May, 2015, 15:25Be the first to give this comment the thumbs up 0 likes

The fact that Apple has managed to un-clog NFC payments is a feat in itself. Point to note is that services do not remain static - expect Apple Pay to morph. Considering how many fledgling services have had to exit by failing to gain traction, it seems bringing incumbents on board is a major achievement.

A Finextra member
A Finextra member 11 May, 2015, 17:19Be the first to give this comment the thumbs up 0 likes

Hi Roy,

I agree with the essence of your post, however, I would argue that Apple has been a great innovator--not inventor--over the years.  Wikipedia describes this difference as:  "Innovation differs from invention in that innovation refers to the use of a better and, as a result, novel idea or method, whereas invention refers more directly to creation of the idea of method itself."

Yes, most at Apple don't know/care about "basis points;" they are trying to build insanely great products.  And the fact IMHO that Apple has been a master innovator makes their current reseller role with Apple Pay all that more disappointing.

A Finextra member
A Finextra member 11 May, 2015, 17:22Be the first to give this comment the thumbs up 0 likes

Hi Charmaine,

Yes--being the most valuable company in the world and, more importantly, a brand that almost any company would like to be associated with... has helped Apple "bring incumbents onboard."  Agree, Apple Pay will morph/improve.

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 13 May, 2015, 10:49Be the first to give this comment the thumbs up 0 likes

Not sure whether Apple makes insanely great products or only the insane find Apple products great:) On a more serious note, Apple was already at the top of the cash hoard and market cap charts even before launching iPhone6, let alone Apple Pay. If it still chose to launch Apple Pay, that signals an intent - at least on the part of Apple’s C-Suite if not the average man in the streets of Cupertino - to care about basis points, security, convenience and other elements of payments. Given that Apple Pay is easily the most frictionless mobile payment method around, I tend to believe that Apple does care about payments. Apple Pay may not have disrupted the 3-legged card payments ecosystem but it has definitely disrupted mobile payments methods. Even assuming that Apple’s interest in Apple Pay is soley to push more iPhone6 handsets, it still has to get the basic elements of mobile payments right: Without that, consumer adoption of Apple Pay will be muted; merchants won’t find any business case in upgrading their terminals to support Apple Pay; if consumers don’t find ubiquitous acceptance of Apple Pay, they won’t buy / upgrade iPhone6 with Apple Pay in mind.

A Finextra member
A Finextra member 13 May, 2015, 18:08Be the first to give this comment the thumbs up 0 likes

Ketharaman--well stated.  I think that when you are as large as Apple, there are only a few market spaces the company could move into in order to generate significant future revenues... and payments is one of them.

Finally, based on latest research re: how many iPhone 6 customers are using Apple Pay (only 6%), it may not be until the iPhone 10 before consumers actually want to purchase the new phone due to Apple Pay functionality...

Now hiring