There’s nothing better than a juicy story. And the juicy story this week was what is said to have lead up to the decision of the eBay Board to spin off PayPal. What’s been reported “according to sources that have knowledge” on both the PayPal and Apple sides, is that PayPal was close to a deal with Apple in the early part of the year to function as Apple’s payment network. That decision was abruptly abandoned when it found out that PayPal had been cheating on it with Samsung and its TouchID product. That is said to have killed the deal and drove former President David Marcus from PayPal since it was reported that he was against the whole thing in the first place. The result is that on 9/9 when Apple Pay was launched, PayPal was nowhere to be found.
I have no idea whether any of this is true but it does underscore just how complicated payments is as an ecosystem. Payments is about co-opetition in spades. PayPal is a competing payments network yet huge customer of Visa and MasterCard. Apple Pay and Visa Checkout are digital competitors in spite of how closely they are working to launch Apple Pay. It’s unlikely that Chase, one of the Apple Pay issuers, is organizing Chase Merchant Services and assembling a rock-star management team because it doesn’t have anything else to do. Citi was (and still is) a major Google Wallet partner. And speaking of Google wallet, most of the brick and mortar merchants that will accept Apple Pay, also enable Google Wallet – Apple’s arch enemy. Many of the online merchants also accept PayPal. And, Subway and Target – both Apple Pay in app partners, are both part of CurrentC (aka MCX) which has demanded exclusivity to be part of the CurrentC network. And, all of these apps work across both the Android and Apple ecosystems.
All that’s to illustrate that it’s tough, but not impossible, to demand exclusives in payments. Merchants are driven by a desire to accommodate the payments preferences of their customers, with one big if: if there are enough of them who want to use it. It’s hard to get any merchant to change unless they’re given a good reason to. Consumer preference tips the scales.
Given the size and significance of Apple and the promise of Apple Pay as a powerful digital payments alternative, it’s not implausible that they’d demand, maybe for a time, some sort of exclusivity in the OEM space from a player like PayPal. Who knows if they did and whether that was ever discussed. Clearly, Apple was able to demand – and get – a number of concessions from the existing players in the payments ecosystem on the basis of its market power, consumer appeal and massive digital account base. And, they’ll be able to demand much more if Apple Pay is successful.