As details continue to emerge on Apple’s ‘Breakout’ initiative, there are indications that the move will help Apple expand its financial services well beyond the existing consumer facing product suite. Ron Shevlin details the trends in Forbes:
Apple’s penetration and control in the consumer market is incredibly strong, but until recently, it’s had little presence on the merchant side. Apple realizes that it needs to pursue a platform business model to protect and grow its market position.
Reports in multiple outlets indicate Apple wants to begin competing in merchant services, which also correlates with the recent announcements that iPhones would be enabled to accept contactless payments. Shevlin highlights current lags in the Apple ecosystem that could be pushing the new strategy:
Apple has some payments shortcomings that is likely influencing the acceleration of the Breakout initiative:
• Apple Pay usage lags. According to a Q1 2022 consumer survey I fielded for Cornerstone Advisors, roughly half (52%) of consumers with a checking account and smartphone make mobile person-to-person (P2P) payments. Apple Pay’s share of this segment is 26%, in contrast to CashApp’s 43% share and PayPal’s 76% penetration.
• Apple Card growth is anemic. After seeing a doubling of Apple Card holders in 2020, growth in 2021 slowed to a crawl. The Cornerstone survey found that the number of consumers with an Apple Card grew from 6.4 million at the beginning of 2021 to just 6.7 million at the start of 2022. This suggests that some (if not many) Apple Card holders voluntarily or involuntarily discontinued their cards in 2021.
Fintech Snark Tank take: Apple is betting that a platform approach will help stimulate Apple Pay and Apple Card growth better (and maybe even faster) than its current marketing approaches.
As Shevlin points out, reducing friction in payments creates a better consumer outcome. Apple appears to be positioning themselves to continue in their preferred unique ecosystem, but with merchant benefits to match their initial consumer-focused approach.
Overview by Jordan Hirschfield, Director of Research at Mercator Advisory Group