Apple’s ‘Far out’ Event: Phones in Focus but Services, BNPL Are Key

For Apple, hardware is but a backdrop in a way, a springboard toward recurring revenues and the further cementing of an ecosystem that revolves around services, including financial services.

We’ll see more evidence of that strategy on Wednesday (Sept. 7), when the technology giant hosts a product event, titled “Far Out,” that will, of course, feature new iterations of its smartphones, and where 5G will be on everyone’s lips.

But the question remains, as the iPhone 14 gets new models and new features, as new cameras are announced, as to whether consumers will be willing to pay for the upgrades.

The promise of 5G remains largely that — promise — as network rollouts are still being tackled.

Indeed, as spotlighted late last month, T-Mobile’s Chris Melus, vice president of product development, advanced wireless solutions at T-Mobile for Business, told PYMNTS that  5G has the capacity to transform commerce, and, specifically, payments. He pointed to the fact that virtual and physical payment cards, ledger and wallet capabilities can be embedded into a digital firm’s existing products.

Read also: Today in the Connected Economy: T-Mobile Previews 5G Payments

While we note that Wednesday’s event will likely focus on hardware, there’s a bit of a white elephant in the room that also might (or might not) explicitly be addressed: Paying for it all. Though higher-priced smartphones have thus far been selling well, one wonders how inclined consumers will be to spend even more on the phones that have the increased video/storage/camera capabilities.

Paying-by-installment will no doubt be a topic of conversation, then, at the “Far Out” event, or immediately thereafter, as stretching those (pricier) price tags over time will be a key ingredient in helping consumers move from aspiring to own the iPhone 14 to actually pulling the proverbial trigger and buying them.

Seeking Some Cross-Pollination

Having the devices in hand will be critical to expanding the Apple ecosystem and boosting the use of Apple Pay. As reported earlier this year, Apple launched Apple Pay Later, offering consumers the option to split the cost of an Apple Pay transaction into four installment payments over six weeks, with no attendant interest charged or fees levied.

Our own data show that about 94% of consumers with Apple Pay activated on their iPhones did not use it in-store to pay for purchases — so it may be the case that the new phones’ heftier price tags help increase the use of Apple Pay. The installment options are also offered on all hardware sold by the company, so cross-pollination see a lift.

But as consumers hold onto those phones for a period of years (Verizon, for example, stretches them out over three years), and upgrade cycles get longer, it is the services business that becomes ever more important. Macworld reported over the long weekend that Apple may be preparing to unveil iPhone subscription service, where the hardware and various software “bundles” go hand in hand.

As to just how important services are, and will be, for Apple: In the company’s latest quarter, revenue growth slowed to 2% year-over-year to $83 billion. But the services segment saw sales up 12% to more than $19 billion. CFO Luca Maestri stated on the conference call with analysts that transacting accounts, paid accounts and accounts with paid subscriptions grew by double-digit percentages year over year.

There are now 860 million paid subscriptions in place, up more than 160 million across the last 12 months.

See also: Apple Services Revenues Gain 12% as Paid Subscriptions Top 860M