With Apple entry into mobile payments essentially a foregone conclusion, what will happen to Square and PayPal, two major players in alternative payments?
Sources tell Bank Innovation that Square and PayPal have been aware of Apple’s plan to enter the mobile payments space and have made plans accordingly.
It’s hard to tell how each company will react, but based on conversations with experts in financial services and technology industries, it looks like Square and PayPal will be a part of Apple plan to enter the payments industry. Each company has its strengths: Square as a small business commerce solution provider and PayPal as a mobile payment processor. Sources tell Bank Innovation that each will be updating their services to work with Apple’s iWallet, which is expected to be launched today.
We thought it was curious that Square introduced an EMV-ready chip reader on July 30, but not an EMV-ready terminal for its small merchant customers. (EMV stands for Europay MasterCard Visa.) As the U.S. prepares for EMV liability to shift from the issuers to the merchants in October 2015, merchants are preparing by updating their terminals. Most EMV terminals come with NFC baked into the point-of-sale register, though sometimes the chips may be “dark,” or inactive.
Some think that the new Bluetooth Low Energy (BLE) standard may be incorporated into the Square terminals to allow for remote payments, while others think Square will rely on NFC. Why not both? Sources told Bank Innovation that terminal makers are not only using NFC, but “other technology” in order to prepare for the change to EMV, and that this technology may help pass merchant information to a device to help the system recognize that an actual merchant is attempting to charge the mobile wallet, not a fraudster. The “other technology,” our source said, may be a BLE/NFC combo that helps Square customers accept payments through Apple iOS devices. It seems reasonable to expect that Square will do everything it can to comply with Apple’s new payments platform, since Square’s customer base needs to facilitate transactions through iOS for much of its purchase volume.
PayPal, meanwhile, has one clear strength: its online and mobile checkout system. That ability to pay for a purchase with one click seems like a natural extension of iTunes, according to experts we’ve spoken to. Adding a one-click “buy with iTunes” or “buy with Apple ID” makes a lot of sense. With almost 1 billion cards on file, according to analysts, it makes sense that Apple will want users to start paying with their Apple ID — the debit/credit card on file could serve as the default card, while users would be allowed to upload their own cards as they please. PayPal could be brought in to work with Apple in this one-click checkout. Experts say that PayPal wouldn’t even have to white label their product to do so. PayPal could help Apple add a “buy” button to iOS 8, Industry experts, like Tom Noyes, hypothesize. If PayPal’s robust merchant partners program worked with Apple so their clients can accept “buy with Apple ID,” a mobile/online checkout system that remembers all your card info for you could be a fast and easy way for Apple to enter the e-commerce market without having to do much.
Whatever is coming, we’ll find out more today when Apple announces their newest devices later today at 10 am PST.Like This Post