1. Proprietary and Confidential
7 Reasons Why Apple Could be a Payments
Game-Changer

2. Proprietary and Confidential
The Payments Industry Water Cooler Chatter
Industry pundits, industry players and industry luminaries seem to have all but written Apple off
“Apple is among the world’s fastest growing corporations. But there
are signs that its leaders may be running the risk of committing the
most dangerous strategic mistake the leaders of fast-growing
corporations can make: Taking the customer for granted!”
– , 2012
“And although Apple has a long future, the glory days are over. I
actually think one of the places they will get hit is in the tablet
market…. I think they’ll eventually run out of ideas. I hear Apple is
doing an iPad Mini, and let’s say they get away with that. That’s fine,
but it’s not really innovation just downscaling.”
- Rob Frankel, author of The Revenge of Brand X, 2012
“We blame Apple for losing its mobility mojo. This was simply an
inventory overbuild for the iPhone 5 relative to Apple’s forecast.”
- Vernon Essie, Jr., analyst , 2013
2 |
The Industry Buzz About Apple
• Apple’s best days are behind it. All
of what we see now is Steve’s work
finally reaching the market - there’s
nothing in the pipeline that is “game-
changing.”
• It is destined to repeat its failed
strategy of the 1990’s when its
“closed” system was killed by
Microsoft – Android’s open strategy
will be Apple’s death knell.
• Apple has no payments strategy –
since it decided not to adopt NFC as
a payments enabler, and every other
handset manufacturer has, it will miss
mobile payments

3. Proprietary and Confidential
Really?????
Here are the 7 reasons why 2013 and beyond and
mobile isn't like the 1990’s and the PC for Apple ….
…and why the payments industry should be Sleepless in
Silicon Valley, Seattle, San Francisco, Soho and just
about everywhere else in the world …
3 |

4. Proprietary and Confidential
1. Apple has more populated digital wallets than anyone else. Period
4 |
10
50
75
160
200
400
575
2005 2008 2009 2010 2011 2012 2013
Total iTunes Accounts
In Millions
Adding 500,000 new accounts/day
Analysis
Each iTunes account has a registered card on file and is
used today to buy digital goods, primarily, but also
physical goods at the Apple store and online. It has
amassed a tremendous number of accounts over a
relatively short period of time.
Why the Industry Might Loose Sleep
• With its, 575 million digital wallets, even if only half of
them are in the US, Apple iTunes is a pretty attractive
proposition for merchant acceptance.
• To put things in perspective, that is more than 5x the
number of accounts Chase has, 19x the number of total
credit card accounts in Canada, 1.37x the number of
debit cards issued by MasterCard worldwide.
• In terms of digital wallets, Apple has 5x the number of
credit cards on file as PayPal and 3.4x the number of
credit cards on file as Amazon.

5. Proprietary and Confidential
2. Apple’s Fingerprint Sensor Takes Security Off the Table. Bam!
Analysis
The fingerprint sensor enables users to unlock and access their
phone more efficiently and more quickly. Apple has stated that
the company and the device will not store fingerprints, instead
the iPhone stores the result of a “hash” which can’t reveal the
fingerprint to the company.
Why the Industry Might Loose Sleep
• Consumers “say” that security is a key inhibitor to their use of
mobile phones at the point of sale. Fingerprint enabling sure
seems like a very powerful way to take concern completely
off the table.
• This, then, gives Apple superior authentication capabilities
when enabling secure transactions such as payments. The
“what you have” is uniquely tied to an individual and their
device.
• The question is whether Apple views this capability as so
powerful that it will keep it all to itself when it comes to
enabling access to apps outside of iTunes.
5 |

6. Proprietary and Confidential
3. Apple’s Passbook is a Bar-Code Enabled Payments Holding Tank
Analysis
Passbook was launched in the Fall of 2012 and is a convenient
“container” on the iPhone that is getting people used to storing
anything with a bar code in that container – coupons, boarding
passes and tickets – at least for now. It has helped to “train”
consumers to consolidate things of value that they need easily within
reach on their phone. Apple opened up Passbook to brands by
distributing a PASS API so that brands would have an incentive to
PASS-enable offers and other items that would populate Passbook.
Why the Industry Might Loose Sleep
• 96 brands so far ranging from American Airlines to Walgreens
have created Passbook-specific apps. Over 150 brands have
PASS-enabled coupons that are available to consumers in PASS-
coupon programs.
• Brands are pleased with the ROI of PASS-enabled promotions. For
example, Texas Roadhouse distributed offers based on proximity
and saw a 37% return in 24 hours.
• It doesn’t seem like a very big leap to link payment via iTunes to
those coupons or offers or tickets. But, brands and payment
enablers are at risk of being made invisible once they are in the
Passbook container. Apple’s brand dominates.
6 |
A Cross-Section of the
Passbook Ecosystem

7. Proprietary and Confidential
4. Apple’s iBeacons Will Drive Local Commerce
Analysis
iBeacons were introduced in September of 2013 as part of the iOS7
launch. They utilize Bluetooth Low Energy (BLE) to basically establish
GPS inside of stores – and actually between any two Apple devices.
The magic of this technology is that it does not have to “touch”
anything to activate a transaction of any kind. It is a more merchant-
friendly alternative to POS innovations that drive commerce – offers
and payment. iBeacons, therefore, allow anyone with an iPhone
running iOS7 to be recognized by the merchant when they enter a
store.
Why the Industry Might Loose Sleep
• Innovators are already innovating using iBeacons – and they have
only been available for a few months.
• Use cases already in motion include ad networks to push ads to
iPhone users and apps that hard-code GPS coordinates to iPhones
enable offers to be sent to customers standing in front of items.
• It doesn’t seem like a big leap to link payment via iTunes to POS
environments that run the iOS7 operating system. And, those
handsets, for the most part, will be those that have the biometric
sensor, which makes them ultra secure.
7 |
SAMPLE MERCHANT ECONOMICS
Ave square meters per store: 16,258
Beacons to cover
an entire store =
$5,000
NFC Tags for
100k products =
$10,000
Source: Gigaom, Estimote

8. Proprietary and Confidential
Apple vs. Android Fun Facts
5. Apple iPhone Users Control the Bulk of Spending Power
Analysis
Yes, Android may have greater market share, but on the metrics
that matter most, Apple dominates. It generates more revenue via
the apps store since developers develop more apps for the iTunes
app store - they know they can reach more people since more
people run the most current version of the Apple iOS. And, when
it comes to who totes around the iPhone, those users are more
educated and earn more money – by a country mile
Why the Industry Might Loose Sleep
• When Apple decides the time is right to leverage its iTunes
base for payments, it has a good story to tell.
• Apple owners feverishly stay up to date on the most current
OS. 24 hours after the launch of iOS7, adoption was 35% and
increased to 52% after one week. Even before the launch of
iOS7, 93% of users were running iOS6.
• Apple users control a majority of the spend in the US. Despite
only powering 39.9% of smartphones in the US iOS accounted
for 57% of mobile commerce transactions to Android’s 43%.
Further, when comparing the spending power of Apple users
versus Android users, our analysis suggests that Apple users
control about 66% of the spend in the US.
8 |
vs.40% 31%
Mobile phone owners who earn
> $75,000 per year
iPhone Android
0%
25%
50%
75%
100%
iOS6
iOS7
Apple
Froyo
G-Man
H-Comb
I-Cream
J-Bean
Android
Operating System Adoption
Source: Extremetech, Wall St Cheat Sheet
1 week after release

9. Proprietary and Confidential
6. Apple Owns Both Endpoints | Consumers and Merchants
Analysis
Apple makes money today from payments without trying very
hard at all. How? By selling hardware. The iPhone is the device
that launched Square and just about every other mPOS system
using mobile phones – at least at the start. The launch of the iPad
has had the same effect on small merchant POS. It has also had
the effect of stimulating lots of innovation by those who want to
leverage Apple’s iOS to transform merchant/consumer
interactions, which only makes Apple devices that much more
popular to merchants and consumers.
Why the Industry Might Loose Sleep
• Many have criticized Apple for being a “closed” platform and
losing ground to Android – in fact, its business model is what
prompted Google to vertically integrate with the acquisition of
Motorola and Microsoft to do the same with Nokia.
• Developers flock to the iOS first because it knows it can reach
the greatest number of consumers – and now a growing base
of SMBs.
• It is estimated that there are 62 million points of sale in the US
alone. If Apple did nothing but sell into that market with a POS
replacement strategy it could do pretty well. But we all know
that isn’t where it will stop…
9 |
iOS-Powered POS Systems

10. Proprietary and Confidential
7. Consumers and Merchants Love Apple
Analysis
Not long ago, a survey was done that asked
people whether they would bank at an Apple
bank if they opened one. Unbelievably, 10% of
people said that they would basically trust Apple
to hold and keep their money safe.
Why the Industry Might Loose Sleep
• If consumers are wiling to entrust their savings
to Apple, getting them to use iTunes as a digital
wallet to buy stuff at stores doesn’t seem like
much of a stretch.
• 91% of iPhone owners in the U.S. plan to buy
the next model when it’s time to upgrade while
only 76% of Android users planned to pick up
another Android.
• Brand Keys ranked Apple as the #2 brand that
consumers will be loyal to in the future
10 |
$87.1
Forbes Most Powerful Brands
Brand Value ($USD Billions
$54.7
$50.2
$48.5
$37.6
6% 9% 85%
Devotees
Loyalists Free Radicals
56%
58%
PC Consumer Loyalty
Source: Forbes, Forrester