A recent Washington Post article attempts to make the case that Apple Pay will significantly disrupt the credit card industry.
“Apple Pay is, however, a Trojan horse. Once Apple has established its platform, it won’t need the banks and credit cards any more. It will be able take advantage of another new technology, the blockchain, to offer an alternative payment option.”
“Think about it: today you have a choice between American Express, MasterCard, and Visa, and they charge merchants roughly 2 percent of every transaction. If you were given another payment option, let’s call it AppleCoin, which provided you with a rebate of this fee, and the transaction was easier and more secure than with a credit card, which would you pick? I doubt many people would show loyalty to the credit card industry. After all, it extracts more than $100 billion in fees — a tax that we end up paying for — and gouges us the moment we miss a payment. Apple would dominate this industry.”
It would take many more words to refute all of the assertions made in these quotes (to say nothing of the entire article). Suffice it to say that Apple Pay is not going to “eat” the entire credit card industry. Apple has shown no signs of wanting to replace the banks or card networks (in point of fact, Apple Pay relies very heavily on those parties…particularly the networks).
And casually tossing out the blockchain as a payments infrastructure alternative, without any explanation of how it or “AppleCoin” would work within Apple Pay, is just silly.
Overview by Alex Johnson, Senior Analyst, Credit Advisory Service at Mercator Advisory Group