Apple could kill off Visa, MasterCard

“I’m starting to get the sense that these card companies, many of which have introduced convenience to the payment process, could be in trouble,” Richard Saintvilus writes for TheStreet. “lthough they were successful at convincing consumers that it is best to leave their cash and checkbooks at home, it is not out of the realm of possibility that they could soon become the dinosaurs of the payment process, if they don’t adapt.”

“The one thing consumers can’t ever be without is their cell phones. That’s why vendors like Starbucks, which recently formed a partnership with Square, are becoming more open to the idea of mobile payments, a new craze that has the potential to eventually become the world’s currency,” Saintvilus writes. “If this happens, it would mean that in addition to seeing Visa and MasterCard logos on the doors of your favorite store, you will see logos of Apple and Google.”

Saintvilus writes, “I expect companies such as Apple, Google, Verizon as well as Facebook to step up and define the market.”

Read more in the full article here.


    1. od |äd|
      noun historical
      a hypothetical power once thought to pervade nature and account for various phenomena, such as magnetism.
      ORIGIN mid 19th cent.: arbitrary term coined in German by Baron von Reichenbach (1788–1869), German scientist.

      I hope that clears that up.

    1. Complete nonsense! There still more basic cell phone users than there are smartphone users around the globe.

      People can ink just about anything these days provided they have a front to do it from. Yikes!

  1. The author seems to forget that even if Apple takes over in this realm, the back-end processing of Apple-accrued charges still has to go through the major card companies for processing. That’s where they charge the same fees as in stores, so nothing would change for their incomes. They would actually benefit more by not having to worry about putting in the infrastructure, which they’ll leave to Apple to do. They’ll just process and make money off of the transaction fees that they’ll charge Apple.

    1. Absolutely correct. Apple has no interest in developing a credit card payment system of its own. Far easier to make software for the iPhone like Passport will be that lets a consumer input his/her debit or credit card info and simply generate a bar code for scanning.

    2. The credit card business is very profitable and may well be profitable enough for Apple to develop the infrastructure. There are at least three advantages that Apple has that would certainly help. (1) Apple has over 400 iTunes customers. Apple probably knows who the good customers are (low risk) and could offer much lower interest rates to those good customers. (2) Apple has over 118 billion in cash. Apple currently makes a very small return on this asset. The interest paid by the customers could be chicken feed compared to the fees that vendors pay. Apple could offer the vendors a reduced rate in order to compete effectively. (3) Apple has some of the largest data centers in the world.

  2. Visa and Mastercard are universally accepted at just about any business out there.

    There can be more than one way to pay for things. We have Visa/Mastercard and Cash still works. I don’t see a payment by cellphone burying the others just as Visa/Mastercard have not buried Cash.

  3. Never gonna happen.

    Apple’s current path for getting access to your funds is Visa and Mastercard.

    Sure, they could bypass the two big payment networks and go direct to the banks. That idea would even be fairly practical in most of Europe where the banks are consolidated into just a few major players. But in the US there’s thousands of local/provincial banks.

    Dealing with this mess is why Visa and Mastercard exist. It’s a really big problem, and requires an incredibly large staff. It’s why Apple use Visa and Mastercard.

  4. The card companies should have though of this. Apple is soing the grind-work for them, like other segments that have been changed by Apple’s innovations. And no, the card companies are not going away yet. They will adapt eventually.

  5. F cc!

    IF apple can do direct credit card transactions without banks, and at lower rates to consumer advantage, then who cares if Apple monopolizes this industry too – plus it will work smoother, more ubiquitously, omnipresently & integrate or facilitate our world even further…

  6. I have no inside info on whether or not this is what’s planned, but from a pure capabilities standpoint Apple can side step the CC companies rather easily with Passport, especially with a NFC component built into a portable iDevice.

    The iTunes Store was set up to work based on CC info, because that was the paradigm at the time. Online shopping once could only be done that way. Then came PayPal & similar services, which brought in the added capability of deducting the money directly from a bank account. No CC required there. And of course debit cards issued by local banks with CC logos/capabilities came along too, but CC companies still get a cut there if the system doesn’t allow for your input of a debit pin. Finally, Apple themselves developed their own gift card regime, and with that you need neither CC companies or banks in any form.

    It’s the latter that makes for interesting business opportunities for Apple, with Passport/NFC. For example, an individual could theoretically buy hundreds or even thousands of dollars worth of Apple branded gift cards, activate them, then use them via Passport. Apple would save billions on fees if even 25% of their current iDevice customer base went that route. Apple could encourage even greater adoption levels by giving people discounts of 1-2% just for using the Passport service in just that way – and never lose a penny, since 2% is the usual fee for a CC transaction. Plus, with God-knows-how-much in unused balances sitting in Apple’s coffers, the interest income they potentially could make there would probably be enough to pay for a good portion of the operating costs of the system itself.

    Obviously, partnering with PayPal, or perhaps developing their own similar system, would eliminate the step of buying the gift cards, making Passport even more convenient.

    The whole thing taken as a whole would relegate CCs to where they should have been all along – as a means of short-term emergency credit, available in moderate quantities, when needed most. NOT buying groceries. NOT paying for stamps. Etc… Actual earned cash (if in its electronic form) would sort of become king again.

    And Apple would make for itself yet another paradigm shifting, and perhaps perpetual, revenue stream.

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