American Express (NYSE: AXP) cardholders could be able to use Apple Pay in Canada and Australia this year, a press release from the credit card giant is claiming. The release stated that Amex card members are “expected to be the first to use Apple Pay in Canada and Australia beginning this year.”
The release leaves a lot out; for example, it does not say exactly where in either country Amex card users will be able to use their Apple Pay. It is not hard to imagine Apple Pay being quickly accepted in downtown Toronto, but what about South River, Ontario?
Another problem Apple has encountered in the United States is that large numbers of major retailers refuse to accept the solution. This limits its availability and usefulness. Two of the big retailers that refuse to accept Apple Pay in the United States, Costco (NASDAQ: COST) and Walmart (NYSE: WMT), are major players in the Canadian market.
American Express suffered a major setback last year when Costco, which has around 10 million members in Canada, or nearly one in three Canadians, dropped an exclusive card arrangement in its popular club stores. Adding Apple Pay could make up for some of the lost business to Amex but only if Costco were to start accepting the payment app.
What Apple Pay Faces in Canada
Another important omission here is what banks will accept Apple Pay or if any Canadian banks will participate in it. Since Canada’s banking system is far more centralized than that in the United States, its acceptance could be faster in that nation. One advantage for Apple Pay is that Canada’s banking system is dominated by the Big Five: the Royal Bank of Canada, the Bank of Montreal, Canadian Imperial Bank of Commerce, the Bank of Nova Scotia and TD Canada Trust.
The Financial Post, Canada’s answer to The Wall Street Journal; is already reporting that Bank of Nova Scotia’s proprietary Amex card will not be available in Apple Pay. One has to wonder how that will affect the service’s reception north of the border.
Anybody that has been to Canada knows there is almost no such thing as a local bank. In most Canadian towns, there is simply a branch of one or more of the Big Five and nowhere else to bank. All Apple has to do is get the Big Five signed up, and it owns the Canadian market.
Obviously, Apple could also face the problem of having a major Canadian bank say no to Apple Pay or to demand concessions such as higher transaction fees. One has to wonder how popular Apple Pay will be if people cannot access their bank accounts through it.
What American Express Is Not Telling Us about Apple Pay in Canada
Something else that was left out of the announcement was whether other popular credit cards such as Visa and Master Card would be available through Apple Pay in Canada and Australia. Obviously, American Express’s public relations department is not going to promote its competition. In the U.S., Apple Pay accepts Visa, Amex, Master Card and Discover.
Another important omission from the announcement is whether American or British Apple Pay users would be able to use the app in Canada and Australia. I imagine that they will, but it would be nice to know if they could.
If this is true, and I think it is, the number of countries where one can use Apple Pay will increase to four. Currently, the app is only accepted in two countries: the United States and the United Kingdom. It is not available anywhere outside the English-speaking world, although that could soon change.
Apple Pay Coming to Europe and China
American Express’s press release stated that Apple Pay will be available in Hong Kong, Singapore and Spain sometime in 2016. Hong Kong is obviously important because it is part of the People’s Republic of China, the world’s second largest economy. A successful launch in Hong Kong is a test run for introducing Apple Pay throughout China.
Obviously, a successful rollout for Apple Pay in Spain is important because the currency in Spain is the Euro. That would be a test run for rolling Apple Pay out through the European Union, including Germany, which is one of the world’s richest countries. Having Apple Pay available in Spain would put pressure on countries like France to start accepting it.
It should also be noted that a rollout in Spain could be a test run for Latin America because the language is the same. They speak Spanish in every Latin American country except Brazil.
A successful launch in Singapore would be a good test run for introducing Apple Pay in Southeast Asian nations such as Thailand and Malaysia. It could also lay the groundwork for bringing the app to India.
Pressure on Other Payment Apps
These moves will obviously put pressure on Alphabet (NASDAQ: GOOGL), the company formerly known as Google (NASDAQ: GOOG), to roll out its Android Pay out in more countries. Pressure will also be placed on Samsung to extend Samsung Pay to more nations; currently that app is only in the U.S. and South Korea.
This could also put pressure on the consortium of U.S. retailers known as the Merchant Customer Exchange, or MCX, to start rolling its Current C payment app out in more countries. Walmart and Costco are among the companies involved in the MCX. Current C is presently being beta tested in Columbus, Ohio, before being rolled out nationwide. Those tests include some Sam’s Club and Walmart locations in Columbus. One has to wonder if it will come to Canada as well.
There will also be pressure on other companies such as American Express and PayPal Holdings (NASDAQ: PYPL) to launch their own payment solutions. PayPal in particular could be a major player here because it is already one of the world’s most popular digital wallets.
How Accurate Is the Press Release
One has to wonder how accurate this press release is. I tend to believe it because Apple did not go out of its way to announce that the Discover card had been added to Apple Pay. Instead, it relied on Discover to make the announcement.
Apple’s strategy with payment seems to be to let financial services providers do the heavy lifting of promoting the app. This saves Apple money and helps it avoid some of the regulatory and legal pitfalls in the financial sector.
Another reason Apple takes this approach is to avoid bad publicity. It does not have to explain the many deficiencies with Apple Pay, such as all the stores that do not take it. Instead, only the successes get highlighted, which avoids tarnishing Apple’s precious reputation.
It looks as if Apple Pay could soon become a global payment solution. If it does, Apple could become a major player in the payment business, rivaling companies like American Express, Visa (NYSE: V) and MasterCard (NYSE: MA). One has to wonder how long it will be before those companies launch their own payment apps to compete with Apple.
Disclosure: the blogger owns shares of PayPal Holdings Inc.