I expect that Apple Pay and Android Pay will become the dominant “mobile wallets” here in the U.S. – simply because our desire to keep everything simple trumps everything else. I could be wrong of course... They’re not the only competitors. Take Samsung Pay, for example... Android Pay and Apple Pay only work on newer credit-card readers. But Samsung Pay is different... It can be used on virtually all existing credit-card processors. In theory, you can even use it at the old gas station or corner store that hasn’t updated its card reader in decades. How? Samsung Pay uses a technology that fakes like your phone has a magnetic strip. But that technology will be unnecessary soon, as stores are all upgrading their credit-card readers these days... And it only works on a couple Samsung phones. So you can see, Samsung Pay will never be dominant. “Square” is cool, too – you may have visited a small retailer who has a Square reader sticking out of his iPhone. This little square device allows him to swipe a card and have his phone act like a traditional credit-card reader. It’s great for little businesses. But Square likely won’t take over the world. But while I expect most people will gravitate to Apple Pay or Android Pay, Apple and Alphabet (owner of Google and Android) won’t get rich off of them... And we as investors won’t see big returns in those stocks because of mobile pay.
PayPal is the leader in mobile payments in the U.S., by far. However, PayPal’s big risk is that it’s not part of an already existing “ecosystem.” This ecosystem concept is incredibly powerful. WeChat is the dominant ecosystem in China. People do EVERYTHING within WeChat. WeChat’s payment system didn’t really get going until 2013. And now it’s massive. It’s second to Alipay, but with more than 700 million loyal WeChat users, it’s gaining market share daily. Here in the States, we don’t have a big winner like WeChat, yet... But the dominant players are obvious... My kids practically live on Snapchat on their phones... It is their hub of communication. Likewise, Facebook is sort of the grown-ups’ version of Snapchat. Apple has an incredibly powerful ecosystem, as well. My son switched to an Apple iPhone because all his buddies were using iMessage, and without an iPhone he couldn’t be a part of it. For you and me, Apple and Android have ecosystems in place. And they are both so darn good at keeping you in their ecosystems. We pretty much have to pick teams – Apple or Android. And as I learned in China, you can’t underestimate the power of creating these ecosystems that people don’t want to leave. We are already in them. We don’t want to start with something new. Therefore:
American Consequences | 63
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