Thoughts on Apple Pay

I'm feeling very bullish on Apple these days. Despite the #bendgate controversy that began a few days ago, they've done a tremendous job with the unveiling of not only 2 versions of iPhone 6 but also the Apple Watch. I like them so much that I upped my holdings in its stock this morning.

The star of the show, in my opinion, was none of the gadgets Tim Cook revealed during the past 9.09.14 event. Sure the iPhone 6 is snazzy, loaded with the latest processors, camera technology, and even the bigger displays. It's bound to sell millions upon millions -- especially bringing back users who migrated to other platforms for bigger displays. The Apple Watch will also be a huge hit, mainly for its tight integration in Apple's ecosystem and as a fashion accessory. But both of these are just gadgets at the end of the day. The real star was: Apple Pay.

As a tech enthusiast, I've heard about mobile payments before and even have Google Wallet installed previously. But never before has a company with Apple's leverage entered such as space and it's bound to revolutionize the way we think and use mobile payments going forward. Want to know how much leverage Apple has? A good example is looking at the emails sent out by banks and credit card companies to announce their support for Apple Pay. Every single one of mine have sent me emails to profess their love and support. That is absolutely staggering. Not many companies are able to pull off Day 1 third-part support the way Apple has done it here. Rumors are transaction costs are bound to decrease as Apple Pay is supposedly more secure than other means.

More importantly however, is the ease of use. For the first time last week, I used the Starbucks app installed on my Android phone to pay for a couple cups of coffee at Starbucks. Nothing extraordinary about this event except for that it was: (1) my first time ever doing such a transaction, and (2) surprised by how easy and seamless it was. The latter in particular stood out as I returned the following day to do the same, with same results. I swear that the experience (not the coffee) was so good that I felt more attached and loyal to Starbucks. Yet Apple Pay promises to be even more seamless as you no longer would have to go through the motions of unlocking your phone screen and opening an app to pay the transaction -- if Apple's demo holds true, all you have to do is hold your finger to the fingerprint scanner for a second and pay the payment receiver with your phone. Voila! Takes about a second or two, and the transaction is completed.

Overall, I think the changes Apple Pay will usher in are two. On one hand, people will purchase more things and use their phones to pay more frequently due to how easy and seamless the process is. No longer do you have to take out your wallet (after finding it first), pick out the card you want, swipe it, enter your zip code, and (oftentimes) signing the receipt for the cashier. All you'd have to do with Apple Pay is pull out your phone, hold, tap, and done. It's that simple. The second change will be what I mentioned before -- strangely enough, I felt more attached to Starbucks despite McDonalds being my preferred coffee venue (disclaimer: coffee is a commodity to me, so the cheapest vendor gets my business). But likewise I can see myself going to shops and restaurants that accept Apple Pay more than those that do not. What you'll see then, is a domino effect of stores and restaurants scrambling after one another to install NFC-payment receivers for Apple Pay and other forms of mobile payment (e.g. Google Wallet).

Now, everything is not all rosy as Apple Pay has just been introduced and the public hasn't really been using mobile payments. But Apple does a heck of a job marketing its products and features, so I expect people to catch on quickly. The iPhone 6 will eventually give way to future generations and the same goes for Apple Watch. But Apple Pay as a platform is here to stay and it's going to be absolutely huge. I've put money in my mouth by investing significantly into Apple today, with a strong possibility to further increasing my holdings in the near future.

Oh and one more thing: Apple takes a cut out of every transaction made using Apple Pay.

Economics of Apple's iPhone 5C

As the whole world is probably aware of it now, Apple's newest generation of iPhone was released last Friday and quickly sold out across many countries. This morning, the company reported a staggering 9 million units sold of both the 5C and 5S flavors. Very impressive for any company but, especially for Apple, it demonstrates that despite all the competition from Google's Android platform, its own iOS and iPhone devices still command a massive following.

What's interesting about all this is the attention and ridicule at Apple's decision to release a cheaper companion to their flagship iPhone. For the current (seventh?) generation, this means the iPhone 5C. The general opinion was that without a cheaper version of the flagship iPhone, Apple would be surrendering a significant portion of the market to Android handset makers like HTC and Samsung. After all, the $650 unsubsidized price for a top-of-the-line iPhone is beyond what most of the world's population can afford. One popular rationale is that the letter "C" in the "5C" represents China, a country in which iPhones have unsupported by its carriers until recently. In short, not pursuing this lower-tier market segment is akin to throwing away good money -- something unacceptable to any rational corporate executive.

Returning to the topic of the new iPhones (5S and 5C), let's review the differences between the two. The infographic below from CNET does an excellent job of comparing the two. In short, the 5C is akin to the previous generation with the exception of being a bit cheaper, lower build quality (e.g. more plastics involved) and available in different colors. Essentially Apple rebranded the previous iPhone 5 into an iPhone 5C, and released an upgraded version known as the iPhone 5S. Nothing too confusing, right?

As an economist, my insight on this strategy of releasing a lower-tier device to go along with a flagship device is simply: it's a very shrewd business decision. People, be them technology critics or the general populace, may whine and scorn Apple's decision to release the iPhone 5C, but they overlook the behavioral element that Apple is targeting.

In economics, this behavior is known as "relatively". One of my favorite economists, Dan Ariely, presented the case so well in his book "Predicably Irrational". Relativity refers to the human tendency to compare their environment or a good relative to another. However, the caveat is that we prefer to compare things that are easily comparable. Ariely first observed this phenomenon in an advertisement to subscribe to the magazine "The Economist", when he was presented with 3 different subscription options: a standalone mailed copy, a standalone online copy, or both a mailed and online copies. I forget the exact number he reported, but the last option was presented as much cheaper than the first two combined. The result is that "The Economist" probably sold the combination option much higher than the first two. (There's also a really good example about honeymoon options from the Wikipedia link above.) The bottom line is, when one is presented with comparable products but one is clearly superior, the superior product tends to get purchased.

Do you see why Apple released the iPhone 5C now? I get that its cheaper price allows greater market penetration than otherwise, but the iPhone 5C also indirectly (yet very effectively) promotes the purchase of the iPhone 5S. This is especially given that the 5S is only $100 more and provides essentially double the performance of the 5C. When your average consumer is presented with the choices of, say, a Samsung GS4, an iPhone 5C, and an iPhone 5S, the 5S would probably win out. Curiosity, it also dissuades any current iPhone users from jumping the ship. Apple ultimately may not move as many units of 5C but the company still wins in the end, regardless. And as the late Steve Jobs puts it so well, "If you don't cannibalize yourself, someone else will".

Monetization of This Blog

I finished my finals exam a few days ago and have been relishing a class-free summer since. Amongst others small things, I do have personally-assigned projects like learning some programming language (SQL, TOAD, VBA) and playing the guitar.

Lately I have also begun exploring the idea of monetizing this blog -- after coming across an amalgam of success stories. Before you (the imaginary reader?) lash out against this practice, I must point out a few items concerning this monetization process:

• For now this is just a trial period as I test out the feasibility of including ads.
• I need some capital to fund blog-expansion methods outlined previously, such as buying a camera to take pictures.
• 99.9% of the time, the ads will be provided through Google Adsense and be located on the right hand-side of this blog. This means that it should not interfere at all with the posts.
• I also encourage anyone concerned or curious to contact me with any questions about this monetization process through placing ads on my blog.

The above being said, I encourage all readers to check out the ads if time or personal disposition permits. Some of the ads could be helpful -- and it would certainly help fund my blog-expansion projects.

On top of the things already noted, I also developed an outline to produce original content on a variety of topics. Capturing readers aside, I do want to better develop my writing skills through this blog. Thus I plan to categorize future posts into the following topics:

1. Young Professional -- this would include reflections about my daily routines, insight into the working world and potential challenges, and other issues related to work environment such as interactions with colleagues and bosses.
2. Cuisine -- I am certainly not the greatest chef in the world, but I do enjoy cooking and preparing meals to bring to work. My cuisine has a distinct Asian-flavor but are simple and quick to prepare. I will try to take pictures and recount how I prepared the food for anyone interested.
3. Spirituality/Religion -- I am a devout Christian, so I hope to share my experiences with others about living as a Christian. I will also be summarizing Sunday messages I hear from service and anything else related.
4. Personal Finance -- as demonstrated in a previous post about budget, I think this is a very important topic for young professionals. I will also be discussing things like planning from retirement and savings, which will be unique as it will be from my own perspective.
5. General Finance/ Economics -- I majored in Economics and currently pursing a graduate degree in finance, so I can draw from the knowledge I currently possess. I am also a shareholder in some companies, so this topic will be near and dear to me.
6. Technology -- I am a geek.
7. Politics/World News/Miscellaneous -- I like to keep track of world events and reflect on their significance. This will be topic I do so.
8. About This Blog -- I am pretty new to the world of blogging and this marks a new chapter in my attempt to become a better blogger. This topic will consist of any updates to about this blog, blogging in general, including any advice/tips.

Now after reading the breakdown of these topics, you may be wondering how frequent postings will be on these topics. The honest answer at the moment is I am not sure. But I will try to spend 1-2 hours each day blogging on a variety of topics. Some will be blogged more often than others -- for example, technology news may become a daily thing. I am thinking perhaps 4-5 times per day for now.

Thank you for reading! (And please consider checking the ads if interested...)