The Problem With Those Apple Pay Projections

Subscribe Now!

Stay on top of all the latest news and trends in banking industry.



As reports “Apple Pay revenue of $118 million this year and $310 million next year, which is less than one percent of Apple’s estimated revenue of $180 billion this fiscal year. Apple Pay is designed to sell phones and so far, it’s sold a boatload of them. Whether or not Apple Pay is the reason remains to be seen.”

My take: Those projections are very aggressive.


Before explaining my skepticism regarding Piper Jaffray’s forecast, let’s deal with the last two sentences of the quote above. In the second to last sentence, “Apple Pay” is the object in the sentence. So when that sentence says “it’s sold a boatload of them” the “it” is Apple Pay. And when the next sentence says questions “whether or not Apple Pay is the reason” for the boatload of sales, it’s a direct contradiction of the previous sentence.

I’m guessing that what the author meant was that “Apple is selling a boatload of iPhone 6s” and is questioning whether or not sales can be attributed to Apple Pay. But that’s not how it reads.

In addition, what Piper Jaffray projected was that Apple Pay would generate $118 million in revenue in 2015 and $310 million in 2016, not “this year” and “next year.” “This” year is 2014, according to my calendar. That’s a huge mistake,

I’m guessing that there is no editing process at


Now on to the main reason for this post: Those Apple Pay revenue projections.

I have no basis on which to disagree with Piper Jaffray’s estimates. I’ve done no research on this myself, seen no contradicting research, or know what PJ’s methodologies or assumptions were. But pulling a few numbers together leads me to believe the projections are aggressive.

One assumption I start with is that Apple will get 0.15% of all Apple Pay-related sales. I’ve read that there may be a difference between credit and debit card-related sales, but there are a lot of reasons to believe that the volume will be skewed (at least initially) to credit card sales versus debit card (one of which being that the large credit card issuers have signed on with Apple Pay, whereas many banks supplying debit cards are not on board yet).

So, if Apple were to generate $118 million in revenue in 2015, and got 0.15% of AP-related sales, then Apple Pay would account for roughly $78.7 billion in retail sales. To put that in perspective, total retail sales in the US amount to about $4.5 trillion. So, PJ is estimating that Apple Pay will account for 1.7% of all retail sales in the US in 2015.

Is that realistic?

Well, there are roughly 315 million people in the US. Some of them are children and don’t have debit or credit cards. So let’s say there are 220 million consumers. At 85% cellphone penetration, 75% of them owning smartphones, and 45% of smartphone owners owning an iPhone, that comes out to roughly 63.1 million iPhone owners in the US. (Note: This is amazingly in line with published estimates from Statista).

Let’s make an optimistic assumption, and say that one in four (25%) iPhone users upgrades to the iPhone 6 in 2015. That would give us about 15.8 million iPhone 6 owners.

On average, each consumer spends $20,455 each year. This means that the 15.8 million iPhone 6 owners will generate $322.7 billion in retail sales in 2015. If Apple Pay-related sales come to $78.7 billion, then, among iPhone 6 owners, AP-related sales will account for 24% of their total retail spend.


Let’s look out to 2016, when PJ estimates that Apple will get $310 million in revenue from Apple Pay-related sales. I made a few changes to the assumptions listed above: 1) smartphone penetration grows from 75% to 80%; 2) iPhone ownership as a % of smartphone owners increases to 55%, and 3) iPhone 6 penetration (among iPhone owners) doubles from 25% to 50%.

If Apple generates $310 million in revenue, then Apple Pay will account for 4.6% of all retail sales in the US and 25% of iPhone 6 owners’ retail sales, pretty consistent with the 2015 level.

Here are my calculations:

2015 2016
Projected Apple Pay revenue $118,000,000 $310,000,000
Estimated Apple Pay transaction fee 0.15% 0.15%
Total Apple Pay-related sales $78,666,666,667 $206,666,666,667
Total US retail sales $4,500,000,000,000 $4,500,000,000,000
Apple Pay-related sales % of total retail sales 1.7% 4.6%
Number of US consumers                        220,000,000                        220,000,000
Average retail spend/consumer $20,455 $20,455
Cell phone penetration 85% 85%
Smartphone penetration 75% 80%
iPhone ownership 45% 55%
Number of iPhone owners                          63,112,500                          82,280,000
US iPhone 6 penetration % 25% 50%
Number of US iPhone 6 owners                          15,778,125                          41,140,000
Total retail spend by iPhone 6 owners $322,734,375,000 $841,500,000,000
Apple Pay % of total retail spend by iPhone 6 owners 24% 25%


If iPhone 6 penetration only reaches 15% of all iPhone owners in 2015, and Piper Jaffray’s Apple Pay estimate is correct, then Apple Pay will account for 41% of all retail sales generated by iPhone 6 owners!


Bottom line: For Piper Jaffray’s estimates to be correct, it would appear that iPhone 6 owners would have to make some significant shifts to their payments behavior. This seems highly unlikely to me, considering that Apple Pay can’t be the reason driving every iPhone 6 owner to upgrade to the new phone.


This article was originally published on . All content © 2023 by The Financial Brand and may not be reproduced by any means without permission.