Apple Pay will go on to dominate 10% of the world's credit cards

Apple Pay It's a multi-billion dollar sleeper business.

We've seen Apple's services and subscription revenue skyrocket in recent years as the company moves away from hardware revenue and toward value-added services. One of them is Apple Pay, a purchasing technology that uses the traditional mechanics of credit cards, but dresses it with modern, simple and powerful technology.

Despite its launch a few years ago in only one country, Apple Pay it now accounts for 5% of all credit card purchase volume in the world, according to financial research firm Bernstein.
Apple Pay uses iPhones and Apple Watches to exchange payment information with contactless point-of-sale terminals. Adoption has likely accelerated with the early 2019 launch of the Apple Card. Instead of simply paying with other companies' credit cards, Apple becomes the credit card with Apple Card, which the company launched with Goldman Sachs and Mastercard.

The Global Payments Report says that global non-cash transaction volumes reached $539 billion in 2017, and were growing at 12% annually. Others have estimated the volume of global payments at around $1 trillion.

And that means Apple can rake in a lot of money along the way.

Apple Pay it doesn't return a lot of revenue to Apple per transaction: it's just another way to use your credit card. However, every time you use it, Apple gets a reduction of 0.15% of that payment. According to an estimate by 9to5Mac, if only 5% of transactions are made through Apple Pay, Apple would earn $525 million in the United States alone in 2018 transaction volumes.

At 10%, that's over a billion dollars.

And although you may not use Apple Pay all the time if you still have other credit cards, the customers who get the Apple Card are likely to use it almost exclusively, because then Apple can give you colorful reports and data on all your spending patterns.

(Plus, the Apple Card is privacy-safe, has no fees, and has a high money-back policy.)

The Apple Card is now available in the United States and Canada, in most of Europe, and in much of Asia. Add these other countries, add the continued growth of digital transactions, and add the continued penetration of Apple Card in the hands of the Apple faithful… and you have a multi-billion dollar business going.

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And that's the revenue that Apple can essentially sit down and collect. It's basically passive income, because Goldman Sachs and Mastercard do the heavy lifting, while Apple provides some hardware and software.

This should grow year after year.

That will probably worry some financial companies. What if Apple can convert all, or even a substantial fraction of Apple users to Apple Pay, or especially to Apple Card? Suddenly that multi-million dollar business grows even bigger.