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Apple's payments business remains largely underappreciated by investors

Published 05/21/2024, 03:52 AM
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Apple’s payment business is heavily underappreciated among investors, said Evercore ISI analysts in a note, citing positive feedback from their conversations with an expert who previously worked building payments products at Apple (NASDAQ:AAPL).

“The call added to our conviction that Apple has some solid growth runway around Apple Pay, B2C payments, and potentially B2B payments over the long-term,” Evercore analysts noted.

“Apple Pay remains the main focus and most of the moves they are making in the space are driven by a desire to increase Apple Pay adoption,” they added.

This includes recent efforts to work with companies to replace employee badges with Apple Pay, similar to how Apple collaborated with transit providers to replace transit cards with Apple Pay functionality.

Apple’s B2C payment initiatives have mainly centered around tap-to-pay, targeting micro-merchants and enabling them to turn their iPhones into point-of-sale devices.

Now, the tech giant is partnering with companies like Stripe to provide businesses with a more comprehensive payment service. However, over time, the expert believes Apple may aim to handle the entire payment stack in-house, Evercore said.

“The Expert also noted Apple could leverage its growing presence in the enterprise space to enable more B2B functionality over time rather than continuing to focus exclusively on B2C,” said analysts.

One area where Apple Pay trails behind peers like PayPal (NASDAQ:PYPL) is in the e-commerce space, Evercore pointed out.

PayPal is widely accepted by over 70% of online retailers, whereas Apple Pay has much lower acceptance rate. Yet, Apple’s announcement of a Buy Now, Pay Later (BNPL) service could help close this gap, as many online retailers seek to offer a digital wallet and BNPL within a single solution.

“If Apple can narrow this gap, we think a large portion of it’s 1B+ iPhone users would prefer to simply log into Apple Pay when making a purchase rather than re-entering payment information on every website they use,” the investment firm concluded.

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