Tim Cook took the stage at Apple’s Keynote event yesterday, proclaiming “This is huge!” when he announced Apple’s estimate of 10 billion Apple Pay payments in 2019. While Apple has traditionally been quiet on Apple Pay usage, Tim’s remark provides a clue to understanding the scale of Apple’s payment business.
In the summer of 2018, Tim Cook said on Apple’s Q3 2018 earnings call that Apple Pay processed over 1 billion transactions in the quarter. Yesterday’s estimate means Apple needs to average 2.5 billion transactions per quarter this year. Apple’s growth seems promising, but how does Apple Pay stack up against other payment methods?
There are 3 main non-cash payment methods today. Credit cards are dominated by VISA, digital payments are dominated by WeChat, and cryptocurrency payments are dominated by Bitcoin.
Visa is Apple’s newest competitor. Apple just announced their upcoming Apple Card, a tool that will allow the company to bypass credit cards like VISA and MasterCard entirely. Apple’s first attempt at disrupting credit cards will go live in Fall 2019. Despite some exciting initial specs for the Apple Card, VISA still has a lock on the world of payments… for now.
VISA processed 124.3 billion payments in 2018, for a total payments volume of $8.2 trillion. Even if Apple Pay exceed’s Tim Cook’s wildest dreams in 2019, VISA will still be processing 10x as many payments. There are 3.3 billion VISA cards in the world today, which is roughly equal to the number of active smartphones in the world this year. Almost everyone has a smartphone, almost everyone has a VISA. It’s easy to forget how powerful VISA is.
The Spring Estimate: VISA will process 140 billion payments in 2019
Tencent’s WeChat Pay is widely believed to be the world’s largest digital payment network, and closely resembles Apple Pay features and functionality. In August 2018, Tencent claimed their payments business had exceeded 800 million monthly active users. At the same time, Loup Ventures analyst Gene Munster estimated Apple Pay’s user base was roughly 250 million.
Tencent also mentioned that daily transaction volume was up 40% compared to 2017, while Apple Pay’s transaction growth could be upwards of 200% in 2019. Of course, Apple is operating at a smaller scale than WeChat Pay, so for now let’s assume WeChat Pay will do roughly 3x the payments of Apple Pay in 2019, going strictly off their active user base and estimated growth.
The Spring Estimate: WeChat Pay will process 30 billion payments in 2019
A third up and coming payment alternative is Bitcoin. Among the thousands of cryptocurrencies today, a handful have emerged as ‘payment coins’. These coins tend to have basic features, focused exclusively on enabling people to move money without a bank or credit card. Payment coins like Bitcoin, XRP, Litecoin, DASH, and Bitcoin Cash offer permissionless channels for people to exchange value.
However, cryptocurrencies have a steep learning curve and unfamiliar end-user tools. Despite the potential of payment coins, most of the world doesn’t care about them. Bitcoin is the only coin to see significant adoption so far, with roughly 10x more payments per day than every other payment coin. Right now, Bitcoin supports over 400,000 payments per day, up about 30% since the beginning of 2019.
The Spring Estimate: Bitcoin will process 175 million payments in 2019*
This chart below will help put the global payment landscape in context. Apple Pay and the upcoming Apple Card still need 10x growth before they challenge VISA’s dominance, while Bitcoin needs 100x or 1000x payment growth to match up against VISA.
* Bitcoin’s median payment size tends to be much larger than credit cards and digital payment applications like WeChat