Apple Pay’s global strategy

Enrique Dans
Apr 21, 2016 · 3 min read

This week Apple launched Apple Pay in Singapore, it’s sixth market to date, and is readying to enter Hong Kong and Spain over the coming months.

Apple rolled out in the United States on October 20, 2014, a month after it was presented, backed by American Express, Mastercard, and Visa, along with some 220,000 participating shops and banks. Two years on, Apple hasn’t provided any data other than saying that it is enjoying two-digit growth, although some surveys talks of slow take up, while others have dubbed it a failure, and while others yet say that adoption levels of this type in the payment industry shouldn’t be too much of a problem for Apple. Around 18 percent of Americans use their smartphone at least once a week to pay for something, 68 percent of whom use Apple Pay.

After launching in the United States, where the iPhone has a 39.1 percent market share, the company turned to the United Kingdom, where it enjoys a 38.6 percent share of the smartphone market. Apple had to accept lower commissions from the banks: EU law puts a surcharge cap of 0.3 percent for credit cards, and 0.2 percent for debit cards.

Furthermore, transactions are limited to thirty pounds, unless carried out on terminals that accept Consumer Device Cardholder Verification Method (CDCVM), while some major banks, such as Barclays, took their time in signing up, citing difficulties in the negotiations over commissions. At present, British users can pay with American Express, Mastercard, and Visa in just about all the major banks. They largely owe their popularity to the spread of contactless cash registers in more and more shops, along with their use to pay for public transport.

The next countries up were Canada and Australia, in November 2015, both countries with similar banking systems to the United States, and with similar iPhone penetration levels. But the strategy here was to launch solely with American Express, and one that it has continued to apply.

Apple entered China, a market with huge potential, but where iPhone has only a 22.2 percent market share, in February this year through a deal with the only company allowed, Union Pay, the organization that groups together the country’s card issuers, and that has positioned the company to reach just about everybody with an iPhone in China.

Apple with need all the help it can get in a market with such tough competitors as Tencent (TenPay) and Alibaba (Alipay).

And now Apple Pay is available in Singapore, an interesting market with a high per capita GDP, and where 38 percent of smartphones are iPhones. Once again, its sole partner will be American Express, although the support page says that other cards will soon be available through banks such as DBS, UOB, and Standard Chartered.

Apple says that Hong Kong and Spain will be next, again, only through American Express. But these are two very different markets: in Hong Kong iPhone has a 28.6 percent share of the smartphone market, while in Spain that figure is just 9.1 percent. Some would say that 9.1 percent an important social demographic, but it is still a small market share. Spain also has one of the highest rates of smartcard-ready cash registers in the world, which could facilitate rapid take up, unlike all other markets so far.

How will the different players respond? Will Spain’s banks line up to do business with Apple? Will Santander make the first move, bearing in mind its experience in the UK? Or will BBVA, traditionally a pioneer, step in? A number of Spanish banks already have smartphone payment systems for iPhone and Android: what will they now do?

It will be interesting to see how Apple Pay gets on in Spain, a country which in the past has shown itself a keen early adopter. The launch of the service will provide us with some interesting conclusions about the productivity of Spain’s banks, as well as their ability to be proactive and adopt new ideas. Soon, on a screen near you :-)


(En español, aquí)

Enrique Dans

Enrique Dans

Written by

Professor of Innovation at IE Business School and blogger at enriquedans.com

Enrique Dans

On the effects of technology innovation on people, companies and society (writing in Spanish at enriquedans.com since 2003)

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