Apple (NASDAQ:AAPL) announced yesterday that soon it will accept merchant payments directly on an iPhone, turning the mobile phone into a payments terminal. The “Tap to Pay” service utilizes the iPhone’s NFC (near field communication) technology that has been incorporated into the devices for some time now. To launch the feature, Apple announced a partnership with Stripe – a global card processor. Following the announcement, Stripe revealed a “closed beta program” for a service that is expected to be available this spring.
For Apple, this represents another step forward into the Fintech realm. Apple already offers a very popular credit card in partnership with Goldman Sachs, Apple Pay, and digital wallet plus Apple Cash – where users can use iMessage to send cash to others.
Apple’s service had been rumored for several weeks and finally confirmed when Apple issued a release outlining the program.
For merchants using an iPhone, the Tap to Pay feature could be a big win as it eliminates the need for additional hardware. While any cost affiliated with the program remains unknown, you can anticipate it will be competitive to other providers.
So who will lose? Uncertain for now.
American Banker quoted Don Apgar, director of the merchant services practice at Mercator Advisory Group, indicated that Square could have a target on its back. Square currently charges 2.6% + 10¢ per transaction. When a transaction is made via the Square Online Store, Square Online Checkout, eCommerce API, or pays an invoice online, the fee is 2.9% + 30¢ for cards or 1% with a minimum $1 per transaction for ACH bank transfers (via invoices only). Square fees are explained here.
At the same time, Apple could simply partner with erstwhile competitors gaining a cut of the action.
Regardless, Tap to Pay should generate additional incremental revenue for Apple by adding a desired service into an existing device that continues to gain market share – around the world. A forthcoming 5G iPhone SE is expected to be revealed in March – a move that should help boost iPhone utilization even higher with a lower cost device that targets the masses.
Expect more details as the service nears its launch. And no more bulky iPhone add ons at the Apple Store.
