These days, Bill Gates spends most of his time in philanthropic endeavors. That's been the case for more than half a decade, as he officially stepped out of daily operations at Microsoft (MSFT 4.20%) in 2008.
In a recent interview with Bloomberg TV discussing a wide range of topics including Ebola and Microsoft's new CEO Satya Nadella, Bill Gates also had some kind words about Apple's (AAPL 1.92%) new Apple Pay service.
The U.S. is definitely not a leader in mobile payments
The Bill & Melinda Gates Foundation spends most of its efforts trying to help the poorest countries in the world, particularly around health care. But now the foundation is also including financial services as an area where it can do some good.
One key problem that Gates identifies is that current financial systems put low-income households at a distinct disadvantage when it comes to the various fees that financial institutions rely on for revenue. Improving efficiencies and reducing fees will be critical to expanding the reach of financial services to these demographics.
When it comes to mobile payments, some of the poorest countries in the world actually have evolved their infrastructure to accommodate a lack of traditional banks. Kenya has emerged as a leader in mobile payments with its M-Pesa system, which was launched in 2007. Since the system uses cell phones to facilitate digital transfers and reducing the need to handle physical cash when transferring funds, the costs are lower.
How Apple Pay is a "real contribution"
While Apple's goal may not be to help reduce costs, Gates does agree that Apple Pay has incredible potential for driving adoption in developed markets and catalyzing the transition away from legacy plastic cards toward cell phones as a viable payment method. According to Gates:
Apple Pay's a great example of how a cell phone that identifies its user in a pretty strong way lets you make a transaction that should be very, very inexpensive. So the fact that in any application I can buy something, that's fantastic. The fact I don't need a physical card anymore, I just do that transaction and you're going to be quite sure about who it is on the other end, that is a real contribution.
And all the platforms, whether it's Apple's or Google's or Microsoft, you'll see this payment capability get built in. That's built on industry standard protocols, NFC. And these companies have all participated in getting those going. Apple will help make sure it gets to critical mass for all the devices.
Apple Pay will launch later this month in the U.S. only, but the Mac maker says it intends to roll out the service to additional countries in the near future. Considering the breadth of partnerships that Apple has inked with financial institutions and retail merchants, it will take a long time before the service is ready for international expansion. Europe appears to be next on Apple's list.
Can Apple do more?
Apple frequently notes that it wants its products to enrich people's lives, but at the same time its positioning at the high end of the markets it participates in limits its scope of influence. That's not to say that the company is uninterested in broadening its potential customer base, but its tools for doing so are limited given its premium strategy.
Apple is reportedly getting a cut of fees, which would theoretically undermine the notion of reducing fees for lower-income demographics. However, Apple does carry a lot of weight and could still lean on its financial partners to make financial services more affordable for lower-income demographics, particularly since the company is unlikely looking at its cut as a meaningful revenue contributor.
The company has embarked upon various affordability initiatives to increase the appeal of its products in emerging markets, which may help its ability to address lower-income demographics.