“When Apple launched Apple Pay last year, the more progressively minded in the payments industry were disappointed that it decided to work closely with credit card networks and avoided disrupting yet another industry it entered,” Jason Del Rey reports for Re/code. “They may yet get their wish.”
“Apple is now in talks with banks about the development of a new payment service that would allow iPhone users to send money to another iPhone user,” Del Rey reports. “And there’s a chance that Apple will attempt to bypass Visa and MasterCard in the process by working directly with banks on this project, one source with knowledge of the talks said.”
“Although Apple’s strategy has not been fleshed out, the current idea could cost the credit card companies if it becomes a hit (yes, it’s a big ‘if’),” Del Rey reports. “But more importantly, it would set a dangerous precedent for the card networks if Apple, as one of the most powerful technology companies in the world with a track record for shaping consumer habits, builds a new payment product that routes money around their pipes.”
Read more in the full article here.
MacDailyNews Take: The payments industry is in the midst of some very big changes. Technically, what’s to stop Apple from becoming a bank, itself?
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Apple is making a grab for Venmo’s P2P payments turf and might use iMessage to do it – November 13, 2015
Apple discussing mobile person-to-person payment service with major U.S. banks – November 11, 2015>
What’s to stop Apple becoming a bank?
Vested interests in the current system. I don’t think there’s been a “new” bank obtaining a licence in the UK for almost 100 years.
MetroBank?
Been saying it for years, the banking industry is ripe for some Apple-style disruption. Apple Bank would be huge.
Existing money transfers bypass credit card companies. Hardly a massive story. The only change would be that people might increasingly do electronic transfers where previously they might have relied on giving someone cash.
Person-to-person money transfers were never really in the domain of credit card companies, nor were they ever angling to get into that market segment. I’m not sure how would this be a setback for credit card companies; the new rumored solution is not intended to facilitate person-to-business transactions, which are currently done quite well using credit cards.
Credit card business in America is NOT a monopoly in need of serious disruption. There is fierce competition in the market and intelligent consumers can benefit significantly from using credit cards instead of paying in cash. It is extremely unlikely that a cashless service for personal transactions built by Apple would disrupt credit card industry, regardless of how popular it may become.
I would rather stick to cash. Don’t want the taxman (or the wife) to be able to find out how much I spend on hookers a month 🙁
Seriously though, I can see how this would be a great idea but it won’t be replacing cash anytime soon.
I guess I don’t visit hookers (that much)… I can’t remember when was the last time I had to use cash to pay for something. I usually have some $100 in my wallet, just in case, but it often takes more than six months (sometimes a year) before I have to replenish that cash from the ATM.
I live and work in Manhattan, and literally everyone (including the farmers’ markets and taxicabs) accepts credit cards (many of them use ‘Square’, a cheap payment processing service with no monthly fees). Cash has been pretty much replaced for me, and the only thing this might be replacing is if I need to give someone cash (for example, when a group of us goes for office lunch and one person pays, then the rest of us chip in our share). Practically every one in my office has an iPhone, so the possible new payment solution might solve this particular problem for me.
For people in the developed world, working outside the regular banking channels might be of very little benefit, since literally every adult (and quite many teens) already have their own bank accounts. There are several payment processing services that currently allow simple person-to-person money transactions (many without any fees), as do most larger banks. Introducing this service for individual cash transactions would require people to set up some sort of cash account with Apple, or allow Apple to access their bank cash accounts (checking, presumably), so the only meaningful benefit would be not having to pull up that PayPal app and send an e-mail. Presumably, Apple’s solution would be as simple and easy as ApplePay, where user takes the phone, perhaps double-clicks the home button to invoke the wallet, then finds iPhone users in vicinity and picks the one to whom he wants to send money.
For the developing world, where bank accounts are rarely accessible by person-to-person payment services, one of the most common ways today for paying for various services is mobile phone. Businesses that want to accept cashless payments work with mobile operators, who allow mobile users to pay for third-party goods/services using their mobile billing. For prepaid users, the mobile operator deducts the charge from their account balance and transfers the money to the third-party business. For users on monthly plans, the charge appears at the end of the months in the monthly statement. Bank account isn’t needed — user can purchase a money order to cover the monthly bill, or walk into the operator’s shop and pay the bill in cash. Prepaid users can replenish their credit by purchasing refill at a newsstand or convenience store.
I can see how this bank-less, cash-less payment system might provide an excellent solution for parts of the world where people can’t afford bank accounts, but there is a huge problem with this solution: people who can’t afford to have a bank account surely can’t afford an iPhone either… These markets are the ones that give Android dominant market share over iOS, and for them, as attractive and appealing as the possible new person-to-person payment system from Apple may be, it will be just as unattainable.
“in the developed world…literally every adult… already have their own bank accounts”
Seriously? I guess that’s why so many check-cashing places exist in poor neighborhoods all over New York City and the rest of the country.
I mean, if you want to just say “poor people don’t matter,” then that’s your prerogative. I disagree vehemently, but yikes.
Also, there are lots of reasons why poor people might find a way (payment plans, used phones, etc.) to get an iPhone, while not being stable enough to have a bank account. A smartphone is fast becoming a need for people to access resources to help them, communicate with friends, and much more. I know a bunch of people who live in NYC, some of the homeless, who have iPhones. Some had them before they lost their job/housing, some had them donated, some spent what they could to get one.
You should really read more about what it’s like to be poor in the U.S. – your comments makes quite a few incorrect assumptions.
I guess I wasn’t thinking of America. Apparently, 15% of Americans live below poverty line (the number I found astounding, for the most powerful country in the world). So, this perhaps doesn’t quite apply to America.
My argument still remains: people who can’t afford bank accounts can’t afford new(er) iPhones (the ones with TouchID, which support ApplePay). Obviously, over the years, this will change (as iPhone 6 ages and drops in price on the second-hand market).
I mostly agree with your main argument, although I’ve definitely seen homeless and near-homeless people who have an iPhone 6. But, that probably depends on youth and other factors, and isn’t the norm.
Either way, I think your argument about some alternatives to Apple Pay being more useful for poor people is a good one.
Predrag is exactly right. Before anyone goes on about this, look up M-Pesa, the prominent phone-to-phone money transfer system in Kenya and much of East Africa. The phone carrier acts as the “bank.” You don’t even need a very smart phone, just a smart enough phone. M-Pesa has millions of users. It is simple, easy to use, yet brilliant in its conception.
I agree that he’s right about very useful systems in the developing world. I just think that there are quite a few people, especially in the U.S., who are poor enough that having a bank account isn’t guaranteed, but who do have an iOS device (maybe even an iPod touch using Wi-Fi calling or other messaging).