TechCrunch reports that the Amazon Rewards Visa Card has joined Visa, MasterCard and American Express in accepting Apple Pay for credit card transactions. Although some were surprised that Amazon would do business with Apple’s “closed garden,” Chase Bank is already working with Apple Pay at launch. It now seems clear that Apple Pay is about selling a few percent more Apple 6 and 6 Plus, rather than a competitive initiative to compete with Amazon’s virtual stores.
Bank of America, Capital One, Chase, Citi, Wells Fargo and American Express Bank, which together issue the the vast majority of credit cards, have joined the Apple Pay launch. They only pay Apple a small percentage from each transaction, and there are no additional costs to users and merchants for using the smartphone.
Piper Jaffray analyst Gene Munster estimates that Apple Pay will generate revenue of $118 million in 2015 and $310 million in 2016. That is less than 1% of Apple’s $180 billion revenue in the next twelve months and maybe 1.5% next year. The service is a financial loser, but it probably will boost demand for Apple devices by a few percent.
Amazon is unique in that it is one of the few corporate credit cards or prepaid cards that have signed on to the service. Retailers’ proprietary named credit cards, such as Macy’s and Bloomingdales, see their cards as a way to communicate directly with the customer, and they do not want Apple involved in a discounting conversation.
So far, Apple’s new contactless payment system is wrestling with the usual challenges for a new service. Some Bank of America customers were charged twice for purchases; other vendors only allowed customers to purchase one item per transaction, according to the tech savvy CNET blog. This reporter’s friends have been able to use Apple Pay seamlessly at Walgreens, Whole Foods and McDonald’s.
The jury is still out on whether Apple can maintain its hundreds of billions of dollars of profitable sales as a company that is 60% cell phones–phones that do not represent disruptive technical advances.
Google Wallet has been around for over a year with little momentum, so there is nothing revolutionary about Apple Pay. After Amazon has had a couple of weeks to observe Apple Pay, it seems less concerned that Apple is focused on becoming a key competitor.
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