Will Apple's new payment system be able to kill PayPal?: originally appeared on Quora: The best answer to any question. Ask a question, get a great answer. Learn from experts and get insider knowledge. You can follow Quora on Twitter, Facebook, and Google+.
This Is Headline Drama, But The End Results May Hurt
There is little doubt that in the long term Apple will injure a number of companies that invested in mobile wallets. They will also injure a number of companies that offer merchant accounts and particularly mobile payment solutions. So there are really two parts to this story.
On the wallet side PayPal, through their Discover Card relationship will be able to be used with some adjustments. The PayPal wallet will become less and less useful. It was luck that Square canceled the Square Wallet earlier this year.
There is little doubt that Apple will set the standard for other device companies and there will be a great deal of emulation of Apple's processes. This will prove to be very difficult. However similar wallet systems will be presented and it is likely that PayPal may try to lead this enterprise. The end result is Apple will make all other mobile wallet systems look clumsy that came before.
There will be two elements to Apple's iWallet. One where payments are made via NFC. The other where payment card data is transferred from the Secure Enclave of the iOS device and passed on to a compatible App. This would make the transaction 1-click and also significantly lower costs to the processing cost to that merchant.
Payment Solutions And Merchant Accounts
Apple will hold some life line to companies offering merchant accounts. PayPal and Square will no doubt adjust to Apple's use of NFC. Even though both PayPal and Square loudly ridiculed NFC. We may even see Square's NFC system demonstrated on September 9th. Apple granted a favor to many merchant account companies and banks giving them prior notice to build some systems to accept NFC payments, Square was one of these companies.
The surprising news will be just how closely Apple worked with Verifone and Larry Ellison's Micros in what can only be termed a partnership to gain so many large retailer locations. This fact will cast a shadow on payment companies that created very high expectations with iOS based cash registers and payment systems. In effect, Apple has endorsed the traditional companies using the traditional payment terminals.
Additionally, for many reasons, the upgrades for iWallet acceptance to just about every micro-merchant to the very large merchant will be free and thus this will not really offer an opportunity for Square or PayPal to gain new customers seeking access to Apple's iWallet payment system. Companies like Verifone, Bank Of America, Chase, Wells Fargo and processors like First Data will actively hold on to their existing merchants, very large and very small with instant iWallet compatibility, for free.
The long term for PayPal and Square as merchant account providers will be very challenged as Apple, over the next few years, presents more phases to their payment system that will render these companies redundant.
Apple Working With Rather Then Against
Thus Apple is not trying to kill PayPal, Square or really any other payment company, this is the real brilliance of Apple. Apple did not choose a "disruption" narrative but choose to work with, rather then against everyone in the ecosystem. This is the exact same philosophy Apple used when working with record companies and cellular companies. It is the exact opposite philosophy that just about all payment startups subscribed to.
The best thing I can say to any startup or legacy payment company is, I sure hope you knew this was going to happen many years ago and did not laugh it off as being a charlatan notion and thus really planned your steps very, very carefully. One reason I always recommend map makers.
Just The Steps Of A Giant Awakened
So there is no Apple animosity, no, it is more like a sleeping giant that is awakened and takes their first steps. In the path there will be some injuries, sadly some will be fatal.
The giant intended nothing more then to put their foot down.More questions on Quora:
- Online Payment Gateways and-Processing: Will modern payment services such as PayPal and Apple's upcoming payment system replace Mastercard and Visa?
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- PayPal Here: What are the features, and their impact, of PayPal's retail card reader and payment system?