FinTech: RBC Analyst Says Apple Pay Should Offer Cryptos
RBC also recommends that Apple buy bitcoin to pay for the cost of developing crypto functionality.
RBC Capital Markets analyst Mitch Steves recommends that Apple (NASDAQ: AAPL) should throw its hat into the digital assets ring and build trading of cryptos into its Apple Wallet. The analyst said the iPhone-maker could generate substantial revenues given the experience with cryptos at PayPal (NASDAQ: PYPL) and Square Inc (NYSE: SQ). (Bloomberg)
Here’s the math
Steves notes that Square chalks up quarterly crypto revenues worth approximately $1.6 billion on a user base of about 30 million.
Extrapolating that to Apple’s user base, the analyst says: “Apple’s install base is 1.5 billion, and even if we assume only 200 million users would transact, this is 6.66x larger than Square,” according to the report. “Therefore, the potential revenue opportunity would be in excess of $40 billion a year (15% incremental top-line opportunity).”
The analyst, therefore, reasoned that a wallet initiative, with limited R&D, presented a multi-billion dollar opportunity for Apple.
RBC also recommended that one option for the firm could be to create a “closed” system that traded cryptos within the universe of Apple users. This would also solve regulatory and KYC issues, RBC said.
Apple could also consider setting up a crypto exchange.
According to Coin Desk, the RBC report assessed competition as “light” for an Apple exchange.
Here’s how to pay for it all
RBC also made an ingenious suggestion on how Apple could let the market pay for the costs (an estimated $500 million) of the development of its crypto wallet or exchange. The company could simply use some of its enormous cash muscle and park funds in bitcoin, like Tesla (NASDAQ: TSLA) recently, the analysts suggested.
“For example, if the firm purchased $5 billion of bitcoin (20-25 days of cash flow), the price of the underlying asset would need to rise by 10% for the firm to fully fund the entire project in the first place,” the analysts wrote. “This is a solid value proposition in our view as the business would be funded without diluting any other projects at the firm.”
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