Apple will introduce P2P payments in new operating system
Apple has announced at its Worldwide Developer’s Conference (WWDC) that person-to-person payments are coming to Apple Pay. The feature will arrive with iOS 11, which was also announced onstage, and will be available later this year.
As Tim Cook and his team revealed in San Jose last night, iOS11 will include native peer-to-peer payment functionality, via Apple Pay, which will enable iPhone users to send payments to friends and contacts within the iMessage mobile app. ‘Pay Cash’ users will also be able to receive payments from one another using their smartphones. The money will be subtracted directly from their bank accounts and can also be used to make Apple Pay purchases.
iPhone users have previously been able to send P2P payments in the iMessage app, but these were completed using third party P2P providers such as Venmo.
Some are speculating that this move puts Apple in competition with the likes of Zelle and Venmo, but others note that Apple is more likely competing with banks themselves. Now, your iPhone will be able to do what a bank lets you do: send and receive payments, and hold on to money via a virtual Apple Cash Card for future expenditure (this is where those P2P payments go). Customers can also transfer the money into their bank accounts.
The Verge comments: ‘It’s an obvious swipe at the part of the payments market that apps like Venmo, PayPal, and Square Cash have cornered. But there’s a catch — P2P payments with Apple Pay will live inside iMessage, and it’s unclear if Apple will let users perform them outside of its messaging app. Also, the money will be transferred to something called an “Apple Pay Cash Card,” which can then be sent to your bank account. That means Apple is not only coming for the Venmos of the world, but maybe the banks themselves.’
You still won’t be able to pay standing orders, direct debits, borrow or go into overdraft (although interestingly the iPhone Upgrade Programme is essentially a loan, provided in partnership with Barclays). Unlike Zelle and Venmo, Apple’s service will only work across its own devices. And Apple doesn’t yet have a banking licence, so will it ever replace your bank?
The next generation of banking could be more about piecing together relevant services. As Oliver Smith at The Memo opines, ‘[When] Apple’s iOS 11 update lands this Autumn it’ll tick off most of the things you might expect a bank to do, easily matching the feature set of Monzo’s beta.’
Research Manager Chris Ward comments, ‘Whether Apple’s announcement heralds its attempts to become a bank depends on how you define a bank. If a bank is seen only as an institution that holds deposits and lends, then this is unlikely. However, if a bank is seen as any institution that holds a banking licence then this is more likely, especially when combined with the fact that Apple has previously announced plans to move to a subscription model for the iPhone.’
Car manufacturers have held banking licences for a long time in order to give customers the option to buy cars on credit and update to a newer model when it suits them. If Apple were to adopt this model, it could increase its client base by making its products affordable to a wider range of people. With this in mind, Apple could be using its entrance into the payments market as a gateway into offering other ‘financial services’ by first proving to its customers that it can provide the same market-leading user experience for non-physical services as they have come to expect from its hardware and thus gaining their trust and loyalty.
And Apple has one thing that other ‘challengers’ and ‘third parties’ will be envious of: brand. Apple has built its brand on delivering an excellent customer and user experience – it has a loyal following and isn’t an unknown startup. Trust is something that incumbent banks currently have in their favour against those pesky new players; Apple is well placed to rival them.
When Mapa has looked at mobile wallets in the past, it has been noted that little added value is given to users. Why would I use a mobile wallet over a contactless card? This is where Apple could steal the march, combining services (and using customer data) in a smart way to add real value to the ecommerce, physical retail and P2P payments experience. As a company, Apple doesn’t tend to reinvent the wheel, but it did develop the smartphone alongside the introduction of the app store, so it knows all about added value. Oh and by the way, Apple Pay will be available in 50 percent of retailers by 2018.
By launching its own P2P payments service, Apple has cut out the middle man, threatening third party P2P platforms, while its decision to include Apple Pay Cash Cards indicates a potential desire to step further into the financial services space.