Apple Pay Cash: A step in the right direction for mobile payments?

13. December 2017.

By Terry Crowley, CEO of RevChip and TranSend

Sometimes it’s important to step back and look at the business landscape through a wide angle lens. Right now is one of those times.

In the last 10 years, Apple shares have returned 1000 percent, while the S&P has gained 70 percent.

This incredible run has largely been fueled by one thing: Apple has captured 80-percent plus of all smartphone profits that have ever been made in the history of the world. What’s even more remarkable, is that the company has done so with a global market share of just 20 percent.

It’s the 80-20 rule in its most artful form.

The big bet, placed way-back-when, was to dominate the high end segment where brand and performance matter and price is no object. The bet has paid off beyond belief.

Apple iPhones sell for $600-$1,100, while the worldwide average for Android phones hovers just above $200. The App Store supercharges those margins even more. It’s a case study in price elasticity and portfolio theory that will be taught for decades to come.

Now, though, smartphone shipments are contracting. So, what’s Apple doing?

It’s adding critical services.

Apple has always well-anticipated the needs of its devotees and, whenever possible, plumbs them into the iPhone stack at very low levels. Messaging and payments are great examples, but it’s their combination that may turn out to be magical.

This latest innovation in mobile payments is Apple Pay Cash, the native money inside Wallet. Apple Pay Cash is a mobile person-to-person system where funds can be sent and received over iMessage and spent at Apple Pay merchants, both in-app and in-store. Balances are held by a regulated bank (Green Dot) and can be transferred to and from a user’s core checking account at any time.

As expected, the Apple Pay Cash experience is elegant from start to finish. It resonates with a wider audience than Venmo and it’s easier to use than Zelle.

Like Venmo, it’s easy to see Apple Pay Cash to taking hold for use cases like millennials splitting rent and restaurant bills. What’s less apparent, but equally real, are exchanges that go beyond P2P and involve business disbursements. Imagine things like in-app bounty for taking an online survey and cash back rebates instead of coupons. The possibilities are endless and the only real limits have to do with income taxes and money transmission laws.

Apple has another leg up on most of its competition in mobile P2P: acceptance at physical points of sale. From the get-go Apple Pay has operated along the NFC rails set up by Visa, MasterCard, American Express and Discover. These card brands now have plans afoot to widely expand NFC use in the U.S. They have already succeeded in doing so in other markets, including the U.K. and Canada. Such expansion of the NFC reader base is pure tailwind for Apple Pay.

Incredibly, there is an even bigger picture to take in here.

Apple Pay Cash might just be the spark that finally ignites mobile payments on a broad scale. With its focus on premium influencers and its control over a large ecosystem, Apple is in a unique position to effect massive change where others cannot. If that happens, fees related to iPhone commerce will markedly add to Apple’s bottom line.

There are miles to go with the play out of this scenario, but many view it as a quite reasonable outcome.

It’s the job of technology providers to make sure that merchants, payment processors and POS systems providers have the tools they need to participate in a mobile payments boom.

Photo courtesy of Christopher Aloi.

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