Case Study 3 MKT 701 Apple Pay.pdf - Barnett 1 Case Study...

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Barnett 1 Case Study: Apple Pay An analysis of Harvard Business School’s article, Apple Pay, details how Apple innovation can revolutionize any industry. Apple Pay was an instant success and has sparked competitors to launch their own payment systems and improve their existing platforms. Apple Pay is improving its features and expanding its usage; Increased technological competition, barriers to entry, and evolving consumer purchasing habits are the challenges Apple Pay faces and the main reasons that I am presenting three solutions to keep Apple Pay as the mobile payment industry leader. Issues Currently Surrounding Apple Pay Launched in 2014, consumers were able to seamlessly add credit cards on their iPhone 6 and start using Apple Pay at over 220,000 retail stores. Within three days, over one million credit cards were activated with Apple Pay. Apple did not seek to disrupt the industry with Apple Pay, the goal was to add value to it (Gupta et al, 2015). Apple worked with banks, payment networks, and merchants to introduce Apple Pay. Bank leaders saw that mobile payments were the future for customers. Apple provided the software and technology for transactions and, in return received 15 basis points per transaction, about half a cent transaction. The three major payment networks, Visa, American Express, and MasterCard collaborated with Apple because apple drives pay volume and pay volume increases revenue for the payment network. Merchants introduced Apple Pay because it adds additional value to the service level offered to customers (Gupta et al, 2015). Merchants were also incentivized to introduce Apple Pay because, legally, new regulations were forcing all merchants to migrate to new EMV-compliant point of sale terminals and Apple Pay was already integrated in the new systems (Gupta et al, 2015). In 2019,
Barnett 2 65% of retailers in the United States accept Apple Pay, it is cited as the easiest and fastest way to pay in stores (Pollard. 2019). Apple released the iPhone X in 2018. This new model was priced higher than all its predecessors, and smartphone revenue increased by $8 billion. The problem is, Apple sold a record low amount of units (Fiegerman, 2018). Apple once had the market cornered on smart phones, but in 2019, over 18% of users were trading their iPhones in for a different brand. The users switching from the new iPhone X model to Samsung was 26% (Ians, 2019). Apple Pay is only available through Apple products. Competitors all have their own version of mobile payments and mobile wallets that have all the similar features as Apple Pay. As users move away to competitors, like Android and Samsung, the Apple Pay consumer reach shrinks. Apple Pay is accepted at 74 of the top 100 US retailers. Apple Pay, in conjunction with some other services, was Apple’s highest non -iPhone revenue stream in the first quarter of 2019 (Murphy, 2019). With all this exposure, Apple Pay is not accepted at two of the three largest retailers Amazon and Walmart. Both retailers have their own payment system extremely similar to Apple Pay and both non-exclusive to their stores. These two retailers alone earned a combined

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