November 12, 2015
Apple Inc. is in discussions with US banks to develop a mobile-to-mobile payment service that would let users transfer money to one another from their phones, which seems to be something very similar to Venmo and PayPal.
Apple’s own payments system Apple Pay along with other mobile payment systems has been focusing on moving customers away from their wallets, cash, checks and cards in mobile-to-merchant relationships. The new service will be entering the highly competitive space of mobile-to-mobile transactions where PayPal and Venmo have significant shares.
In July, LTP reported that Apple had filed a patent application titled, Person-to-Person Payments Using Electronic Devices to the US Patent and Trademark office. Apple has proposed using mobile devices to make payments between persons through various technologies like Wi-Fi, Bluetooth and near-field communication (NFC). Apple filed the patent on September 30, 2014 and credits Apple’s Senior Wireless Software Architect Ahmer A. Khan and Senior Director of Engineering Timothy Hurley for the invention. It got published on July 2, 2015.
What might be really interesting is that from the July patent, it looks like it might have a proximity P2P payment system apart from remote capabilities. It actually talks about the process in which a user will launch a Passbook or wallet app, such as Apple Wallet to detect nearby devices they want to send payments to and plug in whatever amount they want to send. The payment would then be authenticated by multiple procedures.
One of the successful P2P payments services in recent times has been Venmo. Venmo gained a huge momentum being one of the fastest-expanding services, processing 19% of all mobile person-to-person payments with Square accountable for 10%, according to the recent report from Aite Group. Consumers made $2.1 billion of mobile payments using Venmo in Q3 2015, up from $700 million in the previous year.
Google’s payment startup Square and Facebook also offer person-to-person payments. Patrick Moorhead, Principal Analyst at Moor Insights & Strategy, shared with the WSJ that technology firms are in part battling to get access to users’ financial information which companies can then use to develop other products. For example, when Apple created Apple Pay, it had hundreds of millions of users who had registered credit cards with them on iTunes. As Mr. Moorhead predicted to the WSJ, The winner may be the place where people are already spending their time.
The positive trend for PayPal and Venmo is a good indicator for Apple to enter the blooming market of mobile-to-mobile transactions. Given the fact that younger players like Venmo and Square became popular in the market and gained their share quickly, PayPal has something to worry about if Apple comes up with a quality solution—PayPal’s shares were down after this news came in.
The service would be solely for Apple device owners to send money from their checking accounts and will most likely be linked to Apple Pay. Apple Pay already makes it easy to pay merchants with iPhone or Apple Watch without even touching the wallet, which means the incorporation of mobile-to-mobile payments system into Apple Pay could sway consumers away from competitors like Venmo, PayPal or Square.
As stated in the WSJ, the launch date has not been decided yet. However, the service could get off next year. According to the WSJ, Apple has been talking to a host of banks, including JPMorgan Chase, Wells Fargo, Capital One and US Bancorp.
And even though there are powerful players in the mobile person-to-person payments market already, traditional methods of payments are still prevailing in North America, with less than 20% using their mobile devices to transfer money at least once a week, according to the Accenture report on mobile payments. LTP has been covering the issue of low mobile payments adoption, and in particular, Apple Pay. However, these are still early days for mobile payments, which is a chance for new services to gain market share and seize the opportunity.
Apple’s CEO Tim Cook recently gave a speech in Trinity College in Dublin, where he shared his insights on the way digital payments will conquer the space, saying, Your kids will not know what money is.
With the mobile payments market being in infancy, it may be the perfect time for Apple to introduce its own mobile person-to-person payments system. It is only a matter of time till banks across the globe will feel the urge of entering the same market. However, while the wave of mobile P2P payments is still rising, Apple has a great chance to win in the marketplace.