Apple Moves Toward Expanded Mobile-Payment Service
Apple Inc. laying the groundwork for an expanded mobile-payments service, leveraging its growing base of iPhone and iPad users and the hundreds of millions of credit cards on file through its iTunes stores.
Context & Ripple Effects
The Wall Street Journal reports Apple laying the groundwork for an expanded mobile-payments service, built on two assets the company has spent years accumulating: the installed base of iPhones and iPads, and the hundreds of millions of credit cards already on file through the iTunes stores. The groundwork framing echoes what Bloomberg reported back in January 2011, when Apple was said to be planning a service letting iPhone users pay with their handsets — three years later the card vault, not just the hardware, is the stated lever.
The pickup was unusually broad for a sourcing-based report: Cult of Mac, Mashable, SlashGear, PC Magazine, VentureBeat, Computerworld and others all ran the same story within a day, signaling that payments had become the consensus next arena for Apple's platform.
First-order effects
- Card issuers and payment networks now face negotiations with a counterparty that holds both the customer relationship and the card credentials on file, shifting leverage toward whoever owns the wallet entry point on the device.
- PayPal and incumbent online-wallet providers gain their most credibly resourced competitor yet — a rival with pre-provisioned payment credentials across hundreds of millions of accounts rather than one that must acquire users card by card.
Second-order effects
- Merchants and acquirers would have to decide whether to accept terms set by an Apple-controlled flow at checkout, since declining it means losing the fastest path to iPhone owners' stored cards.
- Rival handset makers and Google are pushed to answer with wallet offerings of their own, making the default payment credential on a phone a competitive feature alongside camera and screen specs.
Third-order effects
- If the pattern holds, the phone displaces the card as the primary payment instrument and the wallet owner — not the issuer or network — becomes the control point through which every transaction is authenticated and routed.
- Banks risk being demoted to balance-holding utilities behind a device-maker interface, a structural shift regulators and card-network contracts would eventually have to absorb if wallets consolidate at the OS layer.
The trend: Consumer payments are migrating from card networks' rails into device-level wallets, with whoever controls the operating system positioned to own the transaction's front door.