How Apple innovated the Business Model of Apple Pay?

Originally posted on my blog on Sep 12, 2014

Many apple fans may argue that Apple’s primary success is centered around innovating new products, other may label Apple as a key innovator in value proposition: The product as an experience — taking the Digital Crown of Apple Watch as a case, but for me, Apple’s primary innovation has always been in creating new and viable business models — better ways to create, deliver and capture value!

For example, we would never expect the same impact if the iPhone or iPad were not associated with the App store and the ecosystem around it. This approach applies to all of the disruptive business models Apple innovates for every targeted industry/market.

Apple pay’s business model

NFC “Near Field Communication Technology” has been there for so long! Google already allows users to use it for payment as part of the Google wallet app. But that business model is lacking important aspects to be widely adopted by merchants and shoppers which was the driver for Apple to innovate a better business model for mobile payment (mPayment) as shown on the following canvas:

• Value Proposition: Apple Pay offers both merchants and buyers a seamless payment method using the iPhone as a wallet -without additional cost on both sides.
• Customer relationships: Apple’s brand and reputation in addition to brands of card companies (visa, MasterCard, AMEX, …) offers buyers confidence based on security and privacy measures applied.
• Revenue Streams: Apple makes money as rebate from Banks per transaction.
• Key activities: Even though buyers are not expected to have the actual credit cards with them at point of sale, Apple Pay offers a “card present” transaction method as it has less chances for fraud and losses compared to “card not present” transactions. That can be assured by logging location (where is the buyer at the time of transaction?) and identity information (who’s phone is this?) — which actually make the transaction even more secure than the regular credit card transaction. right?
• Key resources: Host Card Emulation Technology is a must as it helps in installing the card at the buyers iWallet and keeping it securely stored there. The integration with NFC technology is another key resource to offer NFC-based transaction.
• Key partnerships: For such model to work, Apple should get key banks and merchants as strategic partners and early adopters. It’s definitely a must to get card companies’ buy-in as well (visa, MasterCard, AMEX, …).
• Cost structure: This business model is very scalable as it is centered around having the right infrastructure and integration with partners, in addition to the required technology already developed at the iPhone6 devices.

Notes & feedback:

• You may refer to this question on Quora as a reference.
• Do you see other aspects missing in the canvas I should have included?
• How Google and another mobile payment (mPayment) players should respond to such move by Apple?