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News February 7, 2014

Apple - The New Heavyweight in Mobile Payments?

Last week, more news started to leak surrounding rumors of Apple’s possible ascension into the world of mobile payments. With mainstays such as Square,  Stripe, PayPal, and Google Wallet all earning large profits off of the mobile payments industry, Apple seems to want to try its hand as well. Despite being a global powerhouse, does Apple truly serve as a serious threat?

Apple’s only real attempt into mobile payments is its Passbook app which can use electronic gift cards and coupons to pay for items but is not a true mobile payment system. Up until this point, nothing has been confirmed by Apple but with numerous reported meetings with payment executives and the enticing advantages that comes with having a mobile payments service - don’t be surprised if these rumors actually start to bear truths.

The biggest advantage Apple has is its user base, with hundreds of millions of users of Apple products such as the iPhone and iPad as well as iTunes subscribers; the company has built a loyal customer base that always seems to be eagerly anticipating the newest release from Apple. Access to all of these people as well as email addresses (iCloud and iTunes email addresses) and credit card information (iTunes and the App Store) - Apple has powerful assets to give them a headstart.

Apple, being a powerhouse innovator of technology, could also bring plenty of surprises to the mobile payment market. Apple’s Touch ID technology bodes well for mobile payment technology in terms of security. Featured on its iPhone 5S model, users can scan their thumbprint to not only unlock the phone screen but also confirm purchases made on their phone. The Touch ID technology could play a huge factor in its mobile payment technology making users feel more secure than other platforms, which still have users feeling uneasy about payment security.

The Touch ID could also provide a frictionless process for users, substituting annoying PINs and passwords for unique fingerprints. There have even been reports that the new iPhone 6 is being designed in efforts to push a mobile payments system.

Partnerships may also play a key role in Apple’s foray into mobile payments. There have already been reports of PayPal pitching Apple its services in helping them to launch an iPhone driven mobile payment platform. Whether or not this deal actually goes through, or if Apple even needs PayPal, these reports are an indicator of Apple’s potential threat to PayPal and other players in the industry.

Apple is one of the most powerful tech companies in the world, but do they have the resources to keep their payment processing rate lower than industry leader Square (currently 2.75%)? If they are able to offer businesses and merchants the ability to process their payments at a cheaper cost, they will have a product more valuable than any company competing in the mobile payments arena. The feasibility of such cost cuts is questionable, but if anyone has the power and influence to do so, it is Apple.

One major weakness for Apple is that its payment system would be unlikely to play nice with the Android OS, which will limit its ability to become a true juggernaut. Other programs, such as Square, can be used on multiple platforms—like iOS and Android—and has the flexibility for more growth potential. This in itself may make many merchants stray away from using any platform that Apple may develop, especially in countries where Android OS has a significantly higher amount of users than iOS.

With that being said, there is still a lot of questions to be answered and nothing has been confirmed, but rest assured that all those within the mobile payments industry will be keeping a watchful eye on Apple. 

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