Apple Pay: An Apple Digital Currency

The best solution to wealth inequality? Replace money. c/o: Zechariah Judy/Flickr

In the world of mobile money, Apple Pay is a minnow. The big deals in the mobile payments room are SMS, WAP, and MMS. There are a few others, but those widely-deployed, early-stage mobile currencies account for billions and billions and billions of dollars of mobile cash transactions each year. You can prove this claim here.

Water Supply

There are twice as many humans with a mobile phone as there are humans living in a household with running water. Worldwide, more people have a mobile phone than have access to electricity. A very small number of these are iPhones, slightly more are Android devices, most are old time feature phones, but most can exchange information with Apple’s mobile devices using older technologies, such as SMS, WAP, and more.

You may scoff and say that most of these people are in developing markets so they don’t matter. You’d be wrong – not only is the hint in the name “developing”, but these markets are also precisely the ones most ready to expand, given access to the right kinds of mobile technology. And we know Apple wants to build its business there.

Human Race

People in developing markets are people. They are not dumb statistics, blind dots, m meaningless ciphers of abandoned humanity: They have hopes, dreams, aspirations; they have love, sex, and intelligence. They are real, they are conscious, and they have just as much of a right to improve their situation as you do to buy processed cheese at your local evil supermarket chain (perhaps more of a right).

Enabling the people in the developing markets matters. It’s incredibly important. After all, surely the more economically productive every person on the world becomes, the more money we’ll all have to spread around? Maybe/Maybe not.

Apple is actively working to get its products into these markets. The company wants to make a difference here, and I have a way it may like to use mobile technology and Apple Pay in this effort.

Loyalty (Love is the Answer)

I knew Apple was looking at advanced mobile phones and their capabilities years ago when I spoke with the company’s then QuickTime chief, Frank Casanova. He’d just got back from Japan and was thrilled at how advanced the mobile economy had already become there. This was at a time when most U.S. cellphone users were still figuring out how to use SMS. Japan already had mobile payments at that point. The APAC region is a global powerhouse for these changes.

A fascinating and fact-filled post from mobile industry expert, Tomi Ahonen today, tells us a story about a service called Coke Play. Coke Play is a loyalty scheme that adds a bunch of gamification features – there are lots of schemes like this, they reward brand loyalty with points, and give you games to help you build more points.

Usually that’s where it ends, but Coke Play takes it a step further than that: it also integrates with other payment platforms.

Virtual Action, Real Results

It means that by purchasing the products, looking at the Coke Play ads, or playing the Coke Play games, you earn Coke Play points – and you can use those points to buy things in the real world. That’s because by integrating with other mobile payment platforms, you can accumulate Coke Play points which you can then exchange of digital products like songs and movies; or network products like mobile airtime. It isn’t too hard to imagine being able to use these points to purchase products from online stores, and once you get to that kind of transition from virtual to real world value, perhaps one day you’ll be able to use branded points like Coke Play points to solve real world challenges, such as paying your rent. (Though I think perhaps if rent is your problem you should cut down you coke intake).

Partners For Profits

Apple Pay needs to be able to integrate with existing mobile payment services to weave itself into the existing and quite well developed payments ecosystem that exists in the developing economies. It doesn’t need to dominate the segment to succeed, it just needs to be a good citizen in the digital payments space. We know the kind of people who use its devices will likely be a little wealthier than the person on an old Nokia paying for products using SMS, but that doesn’t mean they won’t want to talk to each other. They may even want to send each other cash using digital payments.

However, what if Apple Pay also became a loyalty scheme, rewarding us for what we did in Apple and partner ecosystems? What if an Apple user gained points for purchasing iTunes products, making payments, new Mac purchases, even visiting an Apple Retail Store? These points could easily be exchanged for anything Apple provides – digital, physical and third party products, services and accessories. We know Apple customers are already heavily invested in the company – so why not let them earn loyalty points?

Points For The People

The next step – the step that could radically transform the company’s position in emerging markets – would be to enable points accrued in the scheme to be used to make purchases in other mobile services (like Coke Play), or to turn them into small amounts of cash. I understand that the financial value of these points for people in the developed markets would be trivial – I think most in the U.S. or U.K. would take their rewards in the form of free movies – but in the developing economies a dollar goes a long way, and the ability for the aspirational, slightly better off iPhone consumer in a developing nation to be able to turn those points into real world products and services for their wider family circle, and send them to those people via SMS, would weave Apple tightly into the existing infrastructure. Crafting a bridge of loyalty built on the existing tight but geographically distributed relationships you find outside the polarized developed economies.

A License to Print Money

Who knows, working with existing operators in these nations, Apple Pay could potentially become a virtual banking system, enabling small loans and other services to customers in the nations in which it is trying to build its business.  I think that is a much better use of the c.$200 billion Apple currently has offshore than repatriation and a shareholder dividend.

Apple has a chance to take the cash it has on hand and create its own unique branded currency worth much, much more than its current money pile. Mobile relationships are worth way more than the fake gold standard promises you find on so-called ‘real world’ currencies. And I think Apple has a potential to do something interesting with Apple Pay here – but it needs to work well with others to realise it.

Go read this blog now for statistics that will amaze you, such as there are more people with a mobile phone alive today than there are people who own a toothbrush.

Jonny Evans

Watching Apple since 1999. I don't say what they should do. I say what they might do. They sometimes do.

5 Responses

  1. melial says:

    Hi Jonny,
    Tomi Ahonen certainly has some interesting statistics and insight into the usage of SMS and the like in the developing world, but you might like to take some of his stats with a bit of a pinch of salt. He tends to have a bit of a pathological disdain for Apple most of the time (and being an ex-Nokia executive himself, he has an understandable palpable hatred of Microsoft).

    Tomi is also well and truly a staunch disciple of the Church of Market Share and refuses to entertain any discussion of active installed base. As a result he actively deletes comments from anyone daring to stray from his dictates on his forums.

    Needless to say this leads him to be eternally focused on Apple’s 12 – 18% quarterly market share figure rather than considering the implications of Apple’s 1 Billion active iOS devices compared to Google’s 1.4 billion active Android devices (tablets + smartphones combined) compared to the 400m active AOSP forked Android users. Tomi can’t seem to accept that iOS devices have significantly greater longevity than the vast majority of cheap throwaway Android phones.

    Anyway, apart from those caveats his blog posts can be an interesting if rambling read.

    • Jonny Evans says:

      Thanks for your comment. I see what you are saying, but Tomi’s fast pen and mastery of statistics help him build strong arguments, that doesn’t mean I agree with his conclusions at all times, but with Apple Pay it seems to me his main criticism is also Apples main opportunity — get into SMS and loyalty schemes!

      • melial says:

        Jonny, having read Tomi’s article, although he presents an interesting perspective, it is apparent that several glaring problems significantly weaken his argument.

        Firstly, Tomi’s hyperbole completely dismisses PayPal, Apple Pay and Bitcoin as “utterly trivial noise” and he yet neglects to mention that PayPal alone saw $100 Billion in Mobile transaction volume in 2016, a solid third as much as all SMS payments. I wouldn’t exactly call that “trivial noise” would you?

        Then there is the fact that he is ignoring the elephant in the room – that mobile phones are in fact the one and only “personal computer” for the majority of the population in the developing world.

        That means he should be comparing this against Mobile + Desktop PC e-commerce in the developed world if he wants to compare respective payments systems.

        From that perspective, just by itself PayPal’s $354 Billion in total transactions in 2016 beats the $325 Billion total for SMS. Again, “trivial noise”? Hardly.

        Now, let’s look at Apple Pay. One hostile estimate pegs Apple Pay transaction volumes at $10.9 billion in 2015. Apple recently reported a 500% increase in Payment volume in 2016, so gives us about $55 Billion dollars even if that lowball figure were correct. Now add in the fact that Apple Pay is now available on desktop computers as well as mobile and you can see these volumes will rapidly increase as Apple Pay rolls out to more and more countries. Again “trivial noise”? Not in my books when you factor in the rapid growth curve.

        Add to this the fact that the 1 Billion-strong Apple Device owning demographic is far more lucrative than the Android demographic with IBM and Adobe both reporting e-commerce transactions from the iOS platform are 400% greater than those from the Android platform. Basically Apple users shoot well above their weight.

        That is one reason why Apple Pay generated a massive 75% of all contactless transactions in the USA in 2015 – and that includes contactless credit cards as well as Android Pay etc.

        Tomi’s usual anti-Apple rhetoric extends to the Apple Watch which he derogatorily names the “iHandcuff’”. Partial observer? I think not.

        Tomi does bring a useful, more global perspective to the table, but he taints it with his hyperbola and attempts at disparaging competitors to try and emphasise his point.

        • Jonny Evans says:

          I do like/respect/crave/need smart readers like you (or Tomi, let’s be honest about that). I ‘grock’ your critique — but — truth is always in the middle, twixt one side and t’other…
          My best way to navigate cynicism is to tune it out. So I hear the bias, but still see wisdom in the maths. Thing is — where Tomi sees weakness, I see opportunity. Apple still — think about that — still — has a huge opportunity. I feel like that is really quite amazing, given its size and status as a huge corporate. What I do not understand is why the world does not go through a root and branch transformation to become more like Apple and less like the cynics. I think it is trying to do just that. I also think the rise of the authoritarian reactionaries is just a phase as the world moves to do just that. Tune Out The Cynicism. But listen to all wisdom.

  2. Jonny Evans says:

    I do think there is a mechanism to put market share into perspective, but I’m not sure I am equipped to do the math for it/

    So, we know most android phones are slower phones.

    So the question is: how many processor cycles does Apple sell each year (including all products) in comparison to its competitors?

    I’d argue that the value of the platform is predicated by its computational power, and the logic I have is that even though android has the numbers, it’s aaples platforms that have the computational power. Which is why they are more widely used, more loyal, and more important in mobile industry development terms.

    After all, what android device has the computational power of iPhone 7??
    Not one.

    I’m sure there is an argument in there, but assessing the computational power of deployed android is quite challenging, given its fragmentation.

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