Will Apple Succeed in Dethroning Paypal with Apple Pay?

Today was a very busy news day for Apple, with the company launching not one or two but

Apple released details of the iPhone 6 and iPhone 6 Plus – what Apple calls “the biggest advancements in iPhone history.” The body of the iPhone has been redesigned to be thinner, with a body of anodized aluminum that seamlessly converges with the glass display. Both versions will run iOS8, the latest version of the Apple operating software which promises a “simpler, faster and more intuitive user experience.” The A8 chip with second generation 64-bit desktop-class architecture provides faster and more energy efficient performance. Combined with Metal, the new graphics of iOS8, the iPhone 6 versions will allow games that are closer to console and 3-D games than ever before. In a departure from other versions, the iPhone 6 will come in two sizes. The iPhone 6 has a 4.7 inch Retina HD display – a 38% larger viewing area than the iPhone 5S- while the iPhone 6 Plus has a 5.5 inch Retina HD display – an 88% larger viewing area. Both versions will also come with Apple Pay, another innovative announced today by the company.

Apple Pay promises to “transform mobile payments with an easy, secure and private way to pay.” How? Apple Pay features a dedicated chip called the Secure Element, which store a unique and encrypted Device Account Number. When a credit or debit card is added to Apple Pay, the card number is never stored on the phone or Apple’s servers – each transaction is authorized by creating a one-time number with the Device Account Number and a dynamic security code instead of the security code from the card. Cashiers will not be able to see the card holder’s name, card number or security code. Apple Pay supports Mastercard, Visa and American Express issued by the most popular banks, accounting for 83% of credit card sales in the U.S. 258 large retailers such as Staples, Walgreens and Macy’s are already on board. Apple Pay will work with over 200,000 retailers that support contactless payments. But that’s just the beginning; the mobile payment business is pretty big. How big? Gartner estimates that mobile payments will grow from 235 billion dollars in 2013 to more than 720 billion dollars in 2017. Even at that size, it will be a tiny part of all retail transaction volume – which added to $15 trillion worth last year.

So far, PayPal seems to be in lead in the mobile payment industry; it moved $180 billion in 26 currencies across 193 countries last year which combines both internet and mobile transactions. It made $6.6 billion in transaction and other fees and has so far, withstood challenges from Google (which first offered Google checkout and later Google wallet), Amazon and Square. However, Paypal’s dominance is in eCommerce where you’re using your mobile device to purchase goods remotely – the offline mobile payment is still a very much open field, despite billions of dollars of investment in NFC (Near Field Communications) technology by Google and other companies. Many doubt that NFC will ever take off, even making fun of it by claiming it stands for “Not for Commerce,” but others claim it’s just a matter of time. Will Apple Pay, which also uses NFC, help accelerate its adoption? If Apple succeeds where Google Wallet failed, it could end up with a sizable share of the combine online/ offline mobile payment market and not only make billions of dollars in transaction fees, it will also collect massive amounts of data about consumers' interest and purchasing behavior, opening up avenues to an additional revenue stream by enabling Apple to build a location aware targeted advertising platform built in to the palm (and with apple watch, wrist) of hundreds of millions of people around the world.

The Apple Watch features a specially designed face, the Digital Crown, which allows users to scroll and navigate via touch – a significant difference from most competing products. In fact, the Digital Crown is so sensitive a user can send their heartbeat to another person. User can send and receive messages, answer phone calls and use comprehensive health and fitness apps directly via the Digital Crown. Other innovations are found in the Apple Watch as well. Force Touch allows the face to differentiate between a tap and a press, allowing easier use of apps. A built in speaker and Taptic Engine technology create a much larger variety of notifications that the user can both hear and feel. The extremely accurate timepiece comes with unique faces such as a 3-D interactive model of the sun, earth and moon. Sparing no detail, the Apple Watch comes in three designs. The body is available in stainless steel alloy, anodized aluminum, or 18-karat yellow or rose gold, while the band is available in 6 versions, ranging from an elastomer sport band to leather to stainless steel.