Apple Pay has secured a dominant position at the point of sale, with two thirds of all U.S. contactless payment volume coming through Apple's new mobile wallet, according to Apple CEO Tim Cook. But this may not be the boost to mobile payments that many experts have long predicted.
Apple Pay remains the only mobile wallet capable of making contactless Near Field Communication payments from Apple handsets. Its key competitors Google Wallet and Softcard are made to support NFC payments primarily from Android handsets (Softcard also supports some Windows Phones).
By the end of Apple Pay's first four months, it had enlisted 750 banks and credit unions, Cook said on a conference call to discuss Apple's earnings for its fiscal first quarter, which ended Dec. 27. By comparison, Google Wallet had only one bank on board during its first year; to get any more participants, Google had to drastically lower its requirements for participation.
The impressive start for Apple Pay was tied to sales of 74 million new iPhone 6 and iPhone 6 Plus devices. Most analysts had predicted about 66 million units prior to the earnings call; the new iPhone models are the only ones that support Apple Pay contactless payments, and they do not support Softcard or Google Wallet at the point of sale.
That means anyone who traded an Android or Windows Phone handset for a new iPhone has likely left Google Wallet and Softcard behind.
"We see that we are appealing to new customers, with those switching from other phones to the new iPhones," Cook said. The growth was "absolutely stunning" in various global markets as well, he added.
Overall, Apple reported revenue of $74.6 billion, an increase of 30% from a year earlier, and earnings of $18 billion, up 38%. It was considered the most profitable quarter of any company ever.
Apple Pay also enjoys the support of merchants, Cook noted. One retailer, Panera Bread, reported that Apple Pay accounts for 80% of the mobile payment transactions it accepted, Cook added. Since using Apple Pay, Whole Foods Market has seen mobile payment activity increase by more than 400%, Cook said.
Cook added that USA Technologies would also support Apple Pay through its technology on more than 200,000 vending machines, kiosks, parking meters, and laundry machines.
Apple plans to further develop its mobile wallet and expand it into other markets, Cook said. The company has "some heavy lifting to reach scale" in other countries because of the different telcos and banks involved, he added.
Apple Pay's contactless payment technology at the point of sale and in-app payment capabilities are equally important, Cook added. "Geographic region will determine which one is bigger than the other," he said.
Mostly, Cook credits merchants with getting Apple Pay deployed ahead of the 2014 holiday season.
"I am positively shocked," Cook said. "I give them a lot of credit for that."
The company remains on target to develop and start shipping the Apple Watch in April, Cook said. In addition to numerous other features, the Apple Watch will operate as a payments wearable.
"Expectations are very high on the Apple Watch," Cook said. "The number of developers writing apps for it is impressive."
As expected, iPad sales dropped to 21.4 million units, compared to 26 million the previous year.
"Over 80% of the commerce taking place on tablets, is taking place on iPads," Cook said. "I am bullish on iPad over the long run."