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How Apple will Conquer the Mobile Payments Market

Back in 2003, Apple launched the iTunes Music Store with 200,000 songs offered at 99¢ each and forever changed the music recording industry. Apple has a history of being a disruptor -- they're the ultimate opportunist that knows how to exploit fear, uncertainty and doubt.

They find opportunity where the executive leadership of the traditional incumbent players are very weak, indecisive and lack a forward-thinking vision of the future market dynamics. So, is that why they launched Apple Pay, to disrupt the nascent mobile payments industry?

Primed and Ready for Exploitation

The latest market study by Juniper Research has found that there will be 516 million mobile users of Near Field Communication (NFC ) contactless payment services by the end of 2019, that's up from 101 million this year.

Their study findings argue that Apple's introduction of an NFC-based payment mechanism -- now known as Apple Pay -- would stimulate the wider marketplace, helping to address the key challenges of contactless awareness and acceptance.


At the same time, Juniper observed that NFC solutions utilizing HCE (Host Card Emulation) were steadily gaining traction within the banking sector. The current momentum in the global marketplace was starting to have an impact.

It said that several pioneers -- including BBVA and Bankinter in Spain and CUA in Australia -- had already launched commercial services, with pilots in operation in countries such as Russia and New Zealand.

Marginalizing the Mobile Network Operators

However, Juniper also pointed out that both these developments threatened the opportunity within NFC for mobile network operators (MNOs). Besides, given Apple's prior success in using the iPhone business model to manipulate and control the hapless executives at mobile service providers, they were prepared to make their next move.

With Apple Pay, the secure element is embedded on the handset and controlled exclusively by Apple -- with HCE, the SE (secure element) no longer has to be physically present in the handset -- once again removing the requirement for MNO involvement.

"We would envisage that while NFC deployments and consumer activity will be buoyed by these developments, the opportunities for network operator involvement are limited. Hence we are likely to see more operators re-evaluating their existing commitments to NFC and possibly withdrawing from the space," said Dr Windsor Holden, head of consultancy and forecasting at Juniper Research.

That being said, it's still unclear, are the current incumbents within the mobile payment sector willing to let Apple dictate the terms of market development for this huge forward-looking opportunity? Will they capitulate? Moreover, was the iPhone introduction a supreme Trojan Horse marketing strategy?

Other key findings from the study include:

  • Three quarters of smartphones worldwide will contain an NFC controller chip by the end of the decade.
  • While NFC can offer retailers a strong value proposition in terms of customer retention and loyalty opportunities in addition to payment, most retailers remain unclear as to its tangible benefits.

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