Commentary

Apple Looking To Cut A Slice Of The P2P Payment Pie

Apple is reportedly talking with several major banks about rolling out a mobile peer-to-peer payment system as early as next year that would compete with apps such as PayPal's Venmo and other services bent on making the traditional bi-fold wallet as dated as a silver dollar. 

“A small but growing number of Americans are already starting to embrace such services allowing consumers to pay baby sitters, split dinner checks and share other bills,” write the Wall Street Journal’s Robin Sidel and Daisuke Wakabayashi in breaking the story yesterday.

Sources tell them that Apple is discussing the new service, which probably would be linked to Apple Pay, with banks including J.P. Morgan Chase, Capital One Financial, Wells Fargo and U.S. Bancorp. 

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“Key details remain in flux, including technical aspects that would determine how the service would tie into the banking industry’s existing infrastructure,” the sources say.  

Apple Pay lets users pay for retail goods using an iPhone, Apple Watch, or iPad utilizing the credit card accounts they already have.

“Though it has been around for years, the mobile payments business is really still in its infancy. But it seems about to explode,” write Brett Molina and Edward C. Baig for USA Today. “ According to eMarketer, about one in five smartphone users will use their phones to make point of sale purchases next year, with mobile payment sales exceeding $27 billion, or triple the amount in 2015. And those figures don't factor in the type of P2P payments that Apple is likely getting into.”

But they are, at least at present, the digital equivalent of a loss leader.

“So-called peer-to-peer payment products can be money-losers for companies, since many are free to use for consumers but not for companies to support. But companies often see them as a way to get more people to use a platform they are built into or to get existing users to use that platform more frequently,” write Re/code’s Dawn Chmielewski and Jason Del Rey. 

“Apple would likely see such a service as a way to get more people using its existing mobile payment service, Apple Pay, and to make iPhones more useful overall in a customer’s life,” they continue.

Indeed, “Jennifer Bailey, vice president of Apple Pay, said at the company’s annual developer conference in June that Apple’s goal was ‘replacing the wallet,’” report Katie Benner and Mike Isaac for the New York Times. “It remains a long way from that goal. As of October, less than 17% of iPhone 6 and 6s users were using Apple Pay, according to data from the research groups PYMNTS.com and InfoScout.”

Investor’s Business Daily’s Patrick Seitz reports that Piper Jaffray analyst Gene Munster doesn’t think that an Apple P2P payment service will “move the needle for Apple.” 

“The purpose of Apple Pay is to improve the mobile iOS experience,” Munster wrote in a research note Wednesday. “We don't necessarily view Apple as a payments company, but it is building an interface layer on top of the existing payments industry. Thus, players that are not included in that top layer can be hurt.”  

Munster also points out that P2P will probably be less lucrative than Apple Pay since consumers don’t want to pay for the convenience. 

Apple has declined to comment, as you might expect, to all comers.

Meanwhile, PayPal took a hit on the market yesterday with its stock closing down 1.8% follow the posting of the WSJ report.

“While declining to comment on the Apple reports specifically, PayPal representatives told CNBC: ‘We welcome any development that encourages people to address the awkwardness of dealing with cash when paying friends or family back. We have multiple services to make that easy including both PayPal and Venmo. Our services work across multiple devices and operating systems, as well as online,” reports CNBC’s Anita Balakrishnan.

Venmo’s “news feed allows users to see their friends’ transfers to other friends, a feature that has been popular with Millennials,” writes the Financial Times’ Leslie Hook. “Venmo saw its payments volume triple during the third quarter of the year, compared to a year ago, reaching $2.1 billion.”

Hmmm. Maybe ESPN can figure out a way to make watching the money flow into a spectator sport. It would be right up there with canoeing and fishing.

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