Why Apple will benefit from Apple Pay—Tim Cook explains

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Using Apple Pay is better than traditional credit card systems

Apple (AAPL) Pay is claimed to be the mobile app that will revolutionize the way we do our shopping. It could even replace our physical wallets. Although this feature was introduced at the event in September, it was released for mass use on October 20—the same day that Apple announced its fiscal 4Q14 earnings.

During the conference call to announce its earnings, Apple’s CEO Tim Cook mentioned that Apple Pay makes payments easier, more secure, and more private.

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With regards to the ease of use, Apple Pay involves placing a finger on Touch ID to authenticate transactions. Mr. Cook also mentioned that Apple wanted to focus on the security features with Apple Pay. There are a number of security issues with traditional credit card systems. In regards to privacy, he mentioned that Apple wouldn’t monetize users’ data—unlike other companies.

It’s true that other companies do use customers’ data to grow their business. Google (GOOGL) has been accused of using users’ browsing habits on the internet to show targeted ads matching users’ interests.

Social networks—like Facebook (FB) and Twitter (TWTR)—are also known to use users’ data. Market Realist covered this in “How Facebook and other social networks monetize users’ data.”

Mobile payment transaction value

Apple didn’t reveal commercial aspect of Apple Pay

The mobile payments market has huge potential. According to a recent report from eMarketer and as the above chart shows, mobile payment transaction in the U.S. is expected to more than double—from $1.6 billion in 2013 to $3.5 billion in 2014. Analysts expect that this market will continue to grow at a healthy rate.

Apple partnered with payment networks—like Visa (V), MasterCard (or MA), and American Express (or AXP)—for Apple Pay.

When asked about how Apple plans to monetize Apple Pay, Mr. Cook didn’t reveal the commercial agreements between Apple and issuing banks. He said the agreements were confidential. However, he did mention that Apple Pay is an attractive feature on Apple devices—in terms of ease of use, security, and privacy. As a result, it will help Apple sell more devices.

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