Apple Pay transaction volume has reached impressive levels, but comparisons between digital wallet activity and the transaction volumes of card networks such as Visa and Mastercard can be misleading. Research estimating that Apple Pay facilitates $6 trillion in annual transactions has prompted claims that the digital wallet has surpassed Mastercard. However, the two play fundamentally different roles within the payments ecosystem.
Apple Pay typically serves as the digital interface consumers use to access payment credentials, while card networks provide the underlying rails that process many of those transactions. Rather than demonstrating that Apple Pay is replacing Mastercard or Visa, rising wallet volume highlights consumers’ growing preference for storing credit cards, debit cards, gift cards, and other payment options within convenient universal digital wallets. That growth can benefit card issuers and payment networks alongside wallet providers.
Recent research highlighting Apple Pay volume of $6 Trillion in annual processing has created an onslaught of mixed messaging working to compare the volume moved through users of Apple Pay, and to a lesser extent Google Pay, to volumes processed through card networks. Several stories, including a recent Apple Insider article by William Gallagher, utilize data credited to comparison site TradingPlatforms to attempt to make the case that Apple has surpassed Mastercard
“New research claims that Apple Pay has surpassed Mastercard in the dollar value of transactions annually, with its $6 trillion total meaning it’s over halfway to equaling Visa.”
In reality, the data highlights the success Apple and Google are having at providing consumers easy access to digital tools with which to process transactions over established payment rails such as Visa and Mastercard. The reported $6 trillion on transaction volume through Apple pay and $2.5 trillion in volume through Google Pay represent an outstanding accomplishment that highlights the changing nature of consumer preferences in how they utilize a wide array of options, everything from credit cards to debit cards to closed loop gift cards, all within the simple access of a single, universal digital wallet. Comments from in the Apple Insider article from the TradingPlatforms analysis highlights the flaw that of comparing the apples and oranges statistics between the transaction volumes:
“”Apple Pay is increasingly becoming the go-to payment method for consumers and businesses alike,” said Edith Reads, who is cited as a TradingPlatforms’ finance expert. “The fact that it has now processed more transactions than Mastercard is a testament to its popularity.”
In most cases, Apple Pay is not the payment method, but instead is the conduit to make the payment, much like a plastic card would be the conduit for a physical card transaction. As I stated in my recent Mercator Advisory Group research, Digital Wallets: Moving Beyond Payments With Expanding Options, the digital wallet space is providing consumers with an increasingly diverse set of options and functionality within their mobile devices in conjunction with more confidence in transactional security. These factors are creating a growing base, with Mercator research indicating 35% of consumers used a universal digital wallet as a payment method within a 12 month period. The rapidly growing use actually provides issuers with an opportunity to be the consumers card on file. By becoming the consumer’s card on file the processors can take their share of Apple, Google and other digital wallet’s transaction volume. In a perfect world for processors, their volume will increase as volume on digital wallets increase on a parallel track.
Apple Pay transaction volume illustrates the increasing importance of digital wallets, but it should not be interpreted as evidence that Apple is overtaking the card networks. Apple Pay and networks such as Visa and Mastercard occupy different positions in the transaction flow and often work together to complete the same payment.
As consumers become more comfortable with digital wallet security and convenience, issuers have an opportunity to ensure their cards become the preferred credentials stored in those wallets. Continued digital wallet growth could therefore increase transaction opportunities for card issuers, processors, and networks rather than simply shifting volume away from them.
Overview by Jordan Hirschfield, Director of the Prepaid Advisory Service at Mercator Advisory Group.
