Apple Pay

Is It Time To Stop Wishing For The ‘Old Apple’ Back?

Since Apple’s Q1 call last week — and their first ever announcement that iPhone sales would likely be posting a year-over-year decline in sales next quarter — well, the market has been “all shook-up,” to say the least.  

So much so that Google was briefly the most valuable company on Earth by market cap — and though Apple has since taken its crown back, many analysts and investors wonder if they’ve just gotten a quick peek at the shape of things to come.  

Google’s future — built squarely on a mobile search business that almost seems to mint money — seems targeted for continued and big growth as the need for its core product keeps growing. Apple’s future — built squarely on mobile phones that almost seems to mint money — seems less sure. And if investors’ fears hold true and the market has reached saturation where iPhones are concerned, then at this point it looks like there’s nowhere for Apple growth to go but down.  

Many analysts and industry watchers have noted this — and pointed to the idea that Apple needs a second silver bullet in the chamber (whether it be iPads for enterprise, the services constellation, Apple TV or Apple Watch) to both diversify the income stream and reassert the firm’s bonafides as the world’s top innovator in the digital space. 

Some watchers, like Harvard Business Review commentator Dr. Juan Pablo Vazquez Sampere, however, have identified the trouble in a slightly different manner.

The iPhone, he argues, hasn’t peaked because of inevitable forces — it has peaked because Apple dropped the ball in its latest iteration in making it a truly vertical leading piece of design.  

“An industry’s growth rate is the result of the activities of the companies in it. If the company that’s traditionally driven industry growth has stopped disrupting other industries, you would expect the growth rate to fall back.”

Other iPhones, Sampere notes, tied their rollout to a “signature disruption” — usually connected to the apps ecosystem, except the iPhone 6. And that difference marked the real start of the trouble for Cupertino, even if no one noticed at the time because the iPhone 6 was too busy breaking every sales record imaginable.  

Could it be because they tied the “signature disruption” to a payments technology that was never destined to ignite?

And does that mean that Dr. Sampere is right – and Apple’s influence is shrinking?  

Well, that depends on what exactly one is measuring.

Why Bigger Screens = Smaller Thinking

“After Steve Jobs came the iPhone 6. It was a game changer for Apple, and not in a good way. Increasing the screen size of the handset is the iPhone 6’s major difference from the iPhone 5,” Sampere wrote.

In the pre-Tim Cook era, the strength of a new Apple device was not just the device’s technology itself, but also an Apple device’s ability to change and even disrupt how consumers interacted with other verticals entirely. iPods changed how people consume music (RIP CDs), and iPhones made constant consumer access to supercomputers the norm — but the underlying pitch from Apple has always been the same.

“Apple has pulled off the same trick in many other industries, and the message for consumers was powerful: buy the latest iPhone because every version will pay off — you will save money and time in many areas of your life,” Sampere wrote.

But the iPhone 6, to Sampere’s eyes, did not have that kind of game changer included; its signature innovation was a bigger screen. And while bigger screens were a popular feature that certainly bumped the bottom line in the short term, they were an early sign that the “new” Apple under Tim Cook wasn’t the same as the “old” Apple under Jobs.

“But screen size is simply an industry feature, one that other smartphone companies have introduced already. It’s a feature valued by smartphone customers, to be sure, but it does nothing to disrupt other industries the way previous iPhone generations did,” Sampere wrote.

An outcome, he notes, that is bad for everyone. Apple once moved the market — and others tried hard to keep up. In the new world order, Apple is not competing like an innovator, but instead like a custodian — which means the market is likely to be a less innovative place.  

“Now that Apple has begun to compete on the same terms as Samsung and the other smartphone providers, there is no smartphone company that is a market-creating innovator,” Sampere speculated. “Apple, Samsung, and the others are stuck in a battle of sustaining innovations, which is about classic competition on who makes a better phone.”

A grim outlook to be sure, especially if the entire mobile ecosystem is waiting for a new bright light to emerge, or are left waiting (as Sampere is at the end of his HBS article) to “have the old Apple back.”  

And while he is certainly not alone in his vigil, it might be worth wondering for a moment if the old Apple is really quite so far behind us as he thinks.

The iPhone 6, More Than Just Bigger — Also Able To Buy A Big Mac

The problem with Sampere article for the average payments and commerce fan is its central premise: that the iPhone 6 launched with only one big innovation, a bigger screen size. And this is a fact testified to by the infinitude of editorials, stacks of analyst reports, and countless think pieces written between October 2014 and October 2015 on how Apple had just changed the face of mobile payments forever. Mobile payments, which almost no one had spent any time discussing outside of tech and financial services circles before 2014, were suddenly a trending topic featured on national papers’ front pages and on networks’ primetime news broadcasts.  

Moreover, Sampere notes in his writings on previous innovations that the iPhone 5 delivered Health Kit, which he praises thusly:

“Most health apps that you can find in the App Store are a technological marvel …”

That’s a hard statement to disagree with — but bio authentication + tokenization + NFC (+ Bluetooth if you are using an Apple Watch) is also pretty hard to argue against as a technological marvel.

Apple also convinced all of the nation’s biggest card issuers to give up some of the interchange fees for the pure privilege of getting to be part of the Apple Pay party. Granted, it is not a technological marvel — but it might just qualify as a miracle on its own. Getting issuers to surrender swipe fees is no easy feat; just ask Walmart.  

And, moreover, Apple pretty clearly had high hopes that Apple Pay was going to be the iPhone 6’s super-sticky app that Sampere credits iPhone 6 models past of having. Tim Cook did, regrettably as it turns out, declare 2015 “the year of Apple Pay” during the much more buoyantly received Q1 call from this time last year.  

And it bears noting that upon the release of Apple Pay, Google did (another) big reorganization — and created Android Pay out of Google Wallet while Samsung bought Loop and launched Samsung Pay. It seems that even in these post-Steve Jobs times Apple’s vertical disruption efforts still have the ability to capture some followers.  

Unfortunately for Apple, Apple Pay did not catch on quite the way its most ardent boosters were expecting. Not easily usable due to relatively low merchant acceptance — and having accidentally given its competitors over at Android Pay a free boost by settling on NFC (HCE) as its chosen method of payments data transmission to a POS — Apple Pay has attracted interest, but not exactly caught fire.  

It is not wholly surprising that Sampere forgot about it; that seems to be a problem the service has been having a lot. Apple Pay may have been designed to be a next-gen sticky feature but, as Karen Webster recently pointed out, that’s not quite how it worked out — and the adoption numbers show it.

“There’s nothing ‘wow’ enough about the device to get consumers – outside of its hardcore fan boys – to make the upgrade worthwhile,” she wrote.

The problem, she notes, isn’t that Apple can’t build an innovative enough phone, but that phones aren’t where the innovation action is anymore.

“The risk to Apple is, ironically, what it introduced the world to: apps. Phones are nothing more than access devices to apps – apps that are increasingly becoming available across platforms and even embedded inside of other apps that provide contextual access independent of a specific device or operating system. Uber can now be accessed across most operating systems, and increasingly inside other apps – e.g. Facebook Messenger and OpenTable. Amazon takes it one step further and can enable ordering and payment inside of any device linked to the ever expanding voice-activated Alexa ecosystem,” Webster wrote.

“The more apps proliferate across the many connected devices that enable access to the Internet, the more vulnerable Apple and its dependency on the iPhone becomes,” Webster added.

That is not an impossible position, Webster notes, that Apple has the ability to turn those phones into the ticket to ride into Apple’s ecosystem — home to apps that one can’t find elsewhere that are particularly useful.   

Apple doesn’t need to be more like the old Apple, Webster notes, because it may just be the case that the time to draft on Steve Jobs’ vision is over. The question will be, what will the new Apple be — and does it have a way to make its most powerful product, the iPhone, remain central without dominating everything else?


New PYMNTS Report: The CFO’s Guide To Digitizing B2B Payments – August 2020 

The CFO’s Guide To Digitizing B2B Payments, a PYMNTS and Comdata collaboration, examines how companies are updating their AP approaches to protect their cash flows, support their vendors and enable their financial departments to operate remotely.