Apple Pay, the new iPhone 6 feature that allows consumers to digitize their plastic credit cards, seems to be buoying its competitors — especially Google Wallet.
An inside source
told Ars Technica that Google Wallet's user sign ups have nearly doubled over the past month, and weekly transactions increased by 50 percent in the last few months. On the Apple Pay side of things, CEO Tim Cook announced that 1 million credit cards were activated on the new system within 72 hours of its debut on October 20.
Both Apple Pay and Google Wallet take advantage of a relatively new technology called a near-field communications chip, or NFC, and interest in both platforms among smartphone users could signal big changes and disruptions for the traditional credit card market.
Currently, Visa, MasterCard, and American Express all benefit from the Apple Pay system because it relies on traditional credit cards. That means the payment networks continue to reap processing fees from merchants for every transaction, often called "swipe fees."
According to The Wall Street Journal, "Absent real competition, the swipe fees continue to grow. The average U.S. swipe fee of 2 percent is the highest of any industrialized country, and the U.S. spends more on swipe fees — more than $50 billion a year — than the rest of the world combined."
Because the fees "are the second-highest operating expense for merchants," retailers are eager to adopt new payment systems that might help them avoid the payment processing tolls.
Under the current iteration of Apple Pay and Google Wallet, those fees still exist, but industry analysts say that if the tech giants can popularize smartphone payments, they may be able to cut Visa out of the equation down the line.