A Tailwind for AAPL Stock?
Apple Inc. (NASDAQ:AAPL) scored a big win this week by launching Apple Pay Singapore. This little nation in Southeast Asia could provide the AAPL stock price with a burst of new life, given its technologically savvy populace.
From its embrace of cashless systems to Apple Pay, Singapore is one of the most advanced payments countries in the world and a key financial and technological hub in the Asian-Pacific region. (Source: “Apple Pay is now available in Singapore,” TechCrunch, April 19, 2016.)
As a result, the people moving to Singapore tend to be young, wealthy, and educated. Those kinds of people are usually early adopters who embrace new technologies before the mainstream market catches on. This demographic and its habits make Singapore a good testing market for Apple Pay.
I have to say that Apple is surprising me with this rollout. The service was initially available in the U.S., Canada, the U.K., and Australia—all places you would expect cashless payments to be possible. But the fifth country on the list was China.
If we start to see significant uptake in China, the potential profits for Apple could be huge. Not only does China have a billion and a half people, but also several hundred million of them are now equipped with smartphones and tablets.
That means the infrastructure is there, but I thought disagreements with the Chinese government would have kept Apple out of China. For instance, Google is banned in China because it refused to allow the government to tamper with search results.
However, that doesn’t appear to be the case for Apple Pay. The company is really just adding another function to its devices by letting users pay for things with their “iPhones” and “iPads.” The endgame is simple: you should be able to buy anything at any store by simply holding your iPhone or iPad near the payment terminal.
Although this may sound less secure than just paying with a debit or credit card, the opposite may be true. Your debit card isn’t stored on the iPhone, nor is your credit card sent to the merchant when you pay. It’s a seamless transfer of funds.
The only thing that’s left is for people to actually start using the app. Right now in Singapore, only American Express cardholders are able to use Apple Pay, but Visa cardholders should have access in the coming months.
But let’s get down to the important stuff. How is Apple going to make money on this feature? Well that’s the good news. All merchants pay a small fee for debit and credit card transactions, but that goes into the pockets of the big banks. It is typically two percent of the sale total. (Source: “Apple Said to Reap Fees From Banks in New Payment System,” Bloomberg, September 10, 2014.)
Apple has forged deals with those big banks to carve out some of that fee for itself. Considering that the mobile payments market is estimated at $90.0 billion by 2027, Apple could be locking in tens of billions more in revenue each year.
That growth could help offset a slowdown in iPhone sales growth, as well as push AAPL stock sky-high.