In our previous article, Apple Pay Today, we analysed Apple Pay’s current market position. While Apple Pay has some advantages over the competition in relation to direct control of hardware, software and services, it isn’t light-years ahead. It’s competing in a crowded market with a very small active customer base. This is a very different position from the disruptor it was to the music business.
So what’s Apple’s game plan? To add just another feature to the payment eco-system, or be something bigger? There are a few hints that might reveal the future of Apple Pay.
Apple’s Disruptive History
Apple is a company in the business of disruption, not necessarily innovation. The iPod was not the only digital music player on the market and iTunes was not the only media player in 2001, but Apple brought the two together and added the iTunes store, turning the music business model on its head.
The other disruption was the iPhone. Once again, Apple didn’t invent the touch screen or the mobile phone, or even the App Store — all of these existed before the 2007 release of the iPhone. But by bringing them together Apple once again disrupted the market. It created a whole new industry with the app and cloud ecosystem.
What’s interesting about Apple Pay is that the company has taken the approach of a re-seller of credit card services, rejecting the disruption model altogether.
Cosying Up to Facebook
In January 2016, Facebook announced it has no interest in entering the payment business, but would be willing to partner with Apple to provide the best experience possible for its social network users. The more Facebook can encourage its users to spend, the more money it makes from selling ads. This doesn’t mean Facebook wouldn’t partner with Google, but it’s no coincidence Apple Pay was mentioned first.
While Apple Pay doesn’t support peer-to-peer (P2P) payments just yet, there are a few commentators saying it’s not far off. The obvious feature is this will allow people to send money to friends and family. This technology already exists with PayPal and Square.
But the real development would be Apple developing P2P directly into its iMessage functionality, because the process would be so simplified (as easy as sending a text message). The impact on cash and cheques would be a game changer as users would be able to bypass cards and cash altogether.
The Possible End Game
There are a few possibilities to consider.
The first of these is that Apple will continue to use Apple Pay as a means to keep people in the ecosystem. However this doesn’t really stack up, as people don’t buy iPhones for Apple Pay. Why would Apple go to the expense of creating a sophisticated payment infrastructure if it doesn’t make an impact on the company’s core business?
Another consideration is that Apple is waiting for a critical mass to begin the disruption. As noted above, by introducing P2P functionality without the need for a card, this could easily be replicated directly with merchants. Apple could easily offer a discount on merchant fees and provide some very seamless e-commerce functionality without much effort.
The question is — why Apple would bother if it’s so far away from their core offering? According to American tech entrepreneur and academic Vivek Wadhwa, Apple understands that the prize in play for global mobile payments is a larger market than that for phones, music, and computers combined.
However, the big prize for Apple would be the massive amounts of user data it would own by cutting out the card companies. Data is the gold of tomorrow.
Apple has always taken its tagline ‘Think Different’ to heart. Conforming to the status-quo has never been its thing. Chances are it’s not going to take a back-seat on Apple Pay either.
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