Apple Card, Apple Pay could be Apple's next multi-billion dollar businesses

Posted:
in General Discussion
Investment bank Cowen forecasts that Apple's payment services, like Apple Pay, are well-positioned to take advantage of the growing fintech and retail markets.

Credit: Apple
Credit: Apple


In a note to investors seen by AppleInsider, lead analyst Krish Sankar notes that Apple's digital payment platforms are a "fast growing but underrated part" of the company's services business. The category includes Apple Pay, Apple Card, and Apple Pay Cash.

All three payment services have, collectively, shown growth of around 100% year-over-year, the analayst said. The ongoing coronavirus pandemic also appears to have accelerated growth and adoption of the financial technology (fintech) services.

"While Apple has portrayed these digital services as complementary to its mobile hardware platforms, we believe future scaling out of these services globally coupled with increasing depth and sophistication of them could position Apple as an emerging contender in the fintech space," Sankar writes.

Within Apple's fintech segment, the analyst expects Apple Pay to remain the cornerstone. The platform could see increasing acceptance at U.S. retailers, and Sankar predicts that the contactless payment service will be the largest revenue driver over the next few years, with an expected $800 million in growth annually.

Sankar sees Apple Pay growing at an 18% compound annual growth rate (CAGR) through 2023, and markets such as Asia and Europe could allow for even further expansion.

The Apple Card, largely off to a slower-than-expected start, could take over as Apple's primary fintech growth driver after 2023. Cowen predicts that Apple Card could grow at an 89% CAGR to $1.2 billion by 2023, based on a "conservative 2-3% penetration rate into digital-based global retail spending."

The analyst said he believes Apple receives a 1% fee for all transactions made with Apple Card. That's in-like with other card issuers, but could end up "the most lucrative opportunity longer-term compared to the Pay and Cash products."

Apple Pay Cash, the company's peer-to-peer payment system, is also very "complementary" to Apple's other fintech products. Cowen is modeling that Apple Cash will see growth, but may remain under $100 million over the next few years. That's because only a small percentage of cash transfers are "instant," which is the only type that generates revenue through a 1.5% transaction fee.

Cowen is modeling that growth from the Apple Card and market penetration in North America could see Apple's fintech segment becoming the next multi-billion dollar business by 2022.

"We expect Apple to remain focused on penetrating the North American market and ultimately the European one as well given the high usage of credit cards and different forms of digital payments including online and mobile/contact-less payments," the analyst wrote.

Taking a broader view of the $25 trillion global retail spending opportunity, Sankar sees retail spending hitting $4.2 trillion in 2020 and rising to more than $6 trillion by 2023. He assumes Apple Card market penetration to double to 2.1% over the same period.

Sankar is maintaining his 12-month AAPL price target of $133, which is based on a 25x earnings multiple on Apple's core hardware products and a 41x multiple on Services.

Shares of AAPL were trading at $114.74 on Monday morning, up 1.50% in intraday trading and 1.64% since Sept. 8.

Comments

  • Reply 1 of 13
    cpenzonecpenzone Posts: 105member
    That's good because it's certainly not going to be their TV service!
    pujones1razorpitlkruppBeatschemengin1anantksundaram
  • Reply 2 of 13
    pujones1pujones1 Posts: 222member
    cpenzone said:
    That's good because it's certainly not going to be their TV service!
    You're right. LOL. 

    This fintech service though will be good. Definitely. I love Apple Pay and Apple Pay Cash. It needs more places it can be used though both online and physically. I love using my watch to pay for things and the occasional ATM access. I'm still on the fence about Apple Card right now but I'm sure I'll get one in the near future. Apple needs to throw some manpower at the fintech stuff and grow it before the other Financial institutions get some old crooked politicians who don't understand tech to force their way onto our NFC chips.
    sellerington
  • Reply 3 of 13
    wood1208wood1208 Posts: 2,546member
    You know along with Apple Pay and Apple Card, Apple should get into FinTech and revenue will explode upwards.
    watto_cobra
  • Reply 4 of 13
    It would be nice to see Apple Cash and the Apple Card available outside the US. I love Apple Pay and use it everywhere I shop. The annoyance (and this is from the banks’ side) is the continued restriction on the amount I can use Apple Pay for. It’s secured by fingerprint or Face ID. There should be a way foe me to say what limit I authorize per transaction or the banks make it higher than $100. 
    watto_cobra
  • Reply 5 of 13
    SpamSandwichSpamSandwich Posts: 33,408member
    Won’t Apple ever get tired of raking in the billions? ;)
    watto_cobra
  • Reply 6 of 13
    GeorgeBMacGeorgeBMac Posts: 10,302member
    Fintech may be the fastest growing industry in the world.  And, it appears to have no top limits to how far it can grow.

    And, Apple seems to be positioning themselves to be part of that industry.  I think they will be able to take it as far as they want to take it.
    watto_cobra
  • Reply 7 of 13
    igorskyigorsky Posts: 583member
    cpenzone said:
    That's good because it's certainly not going to be their TV service!
    I think you're dead wrong...TV+ is going to grow exponentially as they build their content library.  The service that I think will be the biggest headache for them is News+.
    BeatsleavingthebiggStrangeDayswatto_cobra
  • Reply 8 of 13
    22july201322july2013 Posts: 2,523member
    Anilu_777 said:
    It would be nice to see Apple Cash and the Apple Card available outside the US. I love Apple Pay and use it everywhere I shop. The annoyance (and this is from the banks’ side) is the continued restriction on the amount I can use Apple Pay for. It’s secured by fingerprint or Face ID. There should be a way foe me to say what limit I authorize per transaction or the banks make it higher than $100. 
    There are different limits to "contactless payments" in nearly every country (and in most cases there is a national law that sets this limit.) You didn't say which country you were in. Here's the list: https://en.wikipedia.org/wiki/Contactless_payment#Floor_limit In Canada the limit was nearly tripled earlier this year because of COVID-19, but I still go over the new limit when I buy groceries.
    watto_cobra
  • Reply 9 of 13
    Hank2.0Hank2.0 Posts: 132member
    I wouldn't be surprised if Apple comes up with their own way to buy Apple (and other?) stock. Awhile ago Apple did a 4-way stock split bringing the price down from ~$500 to ~$125, making the shares more attractive to small investors as in contrast to other tech stocks like Amazon which is at ~$3000.
    watto_cobra
  • Reply 10 of 13
    BeatsBeats Posts: 2,532member
    I think Apple is dragging their feet in this field  like they did with Home and let Amazon take their ideas and profit. With CashApp, Venmo and Chime taking a big piece of the cake Apple is just watching.

    cpenzone said:
    That's good because it's certainly not going to be their TV service!

    These predictions are dumb. Like saying Disney will fail, but saying this in 1924.
  • Reply 11 of 13
    GeorgeBMacGeorgeBMac Posts: 10,302member
    Beats said:
    I think Apple is dragging their feet in this field  like they did with Home and let Amazon take their ideas and profit. With CashApp, Venmo and Chime taking a big piece of the cake Apple is just watching.

    cpenzone said:
    That's good because it's certainly not going to be their TV service!

    These predictions are dumb. Like saying Disney will fail, but saying this in 1924.

    True!  But, actually, the one who really stole their thunder was China's "We Chat".   It's an entire ecosystem unto itself and includes FinTech.

    But, I have to wonder if Apple's intent is to enter into Fintech as a stand alone product?  Or, are they "simply" trying to produce a FinTech product that compliments and strengthens their iPhone and other products?  I think the evidence so far points to the latter.

    I think the attraction of Venmo may be that it runs on Android or iPhones.   Other than that, it seems to be inferior to the Apple products.   But, if you're a one man shop trying to be paid via a FinTech app, Venmo might suck, but almost everybody can use it (if they are willing to stoop that low).
    watto_cobra
  • Reply 12 of 13
    BeatsBeats Posts: 2,532member
    Beats said:
    I think Apple is dragging their feet in this field  like they did with Home and let Amazon take their ideas and profit. With CashApp, Venmo and Chime taking a big piece of the cake Apple is just watching.

    cpenzone said:
    That's good because it's certainly not going to be their TV service!

    These predictions are dumb. Like saying Disney will fail, but saying this in 1924.

    True!  But, actually, the one who really stole their thunder was China's "We Chat".   It's an entire ecosystem unto itself and includes FinTech.

    But, I have to wonder if Apple's intent is to enter into Fintech as a stand alone product?  Or, are they "simply" trying to produce a FinTech product that compliments and strengthens their iPhone and other products?  I think the evidence so far points to the latter.

    I think the attraction of Venmo may be that it runs on Android or iPhones.   Other than that, it seems to be inferior to the Apple products.   But, if you're a one man shop trying to be paid via a FinTech app, Venmo might suck, but almost everybody can use it (if they are willing to stoop that low).

    I think the problem is, less people know how much more secure Apple Pay and Apple Pay Cash are. People think it's "just another" money app. Apple really needs more focus on this space and more ads to nail in the fact that it's the most secure system out there.
    watto_cobra
  • Reply 13 of 13
    GeorgeBMacGeorgeBMac Posts: 10,302member
    Beats said:
    Beats said:
    I think Apple is dragging their feet in this field  like they did with Home and let Amazon take their ideas and profit. With CashApp, Venmo and Chime taking a big piece of the cake Apple is just watching.

    cpenzone said:
    That's good because it's certainly not going to be their TV service!

    These predictions are dumb. Like saying Disney will fail, but saying this in 1924.

    True!  But, actually, the one who really stole their thunder was China's "We Chat".   It's an entire ecosystem unto itself and includes FinTech.

    But, I have to wonder if Apple's intent is to enter into Fintech as a stand alone product?  Or, are they "simply" trying to produce a FinTech product that compliments and strengthens their iPhone and other products?  I think the evidence so far points to the latter.

    I think the attraction of Venmo may be that it runs on Android or iPhones.   Other than that, it seems to be inferior to the Apple products.   But, if you're a one man shop trying to be paid via a FinTech app, Venmo might suck, but almost everybody can use it (if they are willing to stoop that low).

    I think the problem is, less people know how much more secure Apple Pay and Apple Pay Cash are. People think it's "just another" money app. Apple really needs more focus on this space and more ads to nail in the fact that it's the most secure system out there.

    Yes, very true....   Finally, after years of holding back my friend let me set up her iPhone with Apple Pay (so she could use Apple Cash) but she has still refused to use Apple Pay!   She thinks it's less secure than swiping her card at the gas pump!

    I've explained to her that even my own credit card company suggested I use Apple Pay because it is more secure than their chip card, but I get no response.
    watto_cobra
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