Commentary

The $160 Billion Burning a Hole in Apple’s Pocket

Everyone’s favorite payments parlor game is speculating about what, if anything, Apple plans to do in the mobile payment space. Just last week, we heard the 4th, or was it the 6th time, that it will launch the iPhone 6 with NFC capabilities. Surely, with $160 billion in cash reserves and ~600M iTunes accounts, something big is in the works – or is it? Here are thoughts on how Apple could spend its cash.

By Jeffrey Green (@epaymentsguy)

Many prognosticators have espoused their thoughts on when and how Apple might eventually venture into the payments space. Apple, tight-lipped as usual, has only hinted at its potential plans through various Near Field Communication patents. But for whatever reason, the company has held off incorporating them into its devices.

This has led to only more prognosticating, not to mention potential delays in the development of a unified direction for mobile payments moving forward. Subsequently, the market is full of an ever-increasing number of alternative providers hoping to come up with the equivalent of the “killer app” that eventually drives the mobile market as the industry “standard.”

And that may be exactly what Apple is hoping happens. After all, Apple is not known for creating things new. It’s best known for taking what has proven effective and making it better through technology, and more user-friendly. And NFC has not yet reached that pinnacle, and it may never do so.

So here sits Apple, with nearly $160 billion in cash, up from “just” $5.5 billion a decade ago, before the iPhone, according to a recent Moody’s Investors Service report. Also compelling are the nearly 600 million iTunes accounts it holds, all of which are tied to a credit card. That’s perhaps the biggest data point that has folks in the payments industry itching to know what Apple has up its sleeve, and their willingness to follow its lead, should it jump into the payments space.

But what will it do with all that cash? Apple’s not known for making big acquisitions. Perhaps its most effective one was the 2012 $356 million deal to acquire Authentec, whose biometric technology Apple integrated into the iPhone 5S home button last year. Holders of the iPhone 5S may use the Touch ID biometric service to make payments, but only within the confines of Apple’s own ecosystem. Apple has yet to indicate whether it plans to allow use in the open market, and there are some security concerns it must address before doing so anyway, as noted in this PYMNTS.com report.

So what are Apple’s bigger plans? In January, a new patent hinted at Apple’s efforts to venture into “touchless” payments, suggesting either Bluetooth or NFC-empowered payments may be coming to the iPhone 6. But, as we’ve learned in the past, that’s no sure thing. Apple’s iBeacon technology, which uses Bluetooth Low-Energy (BLE) technology to allow merchants to communicate with customers in stores, shows promise, but it’s also a risky proposition. Merchants are treading carefully with beacon technology to avoid scaring customers who suddenly realize how much information they have about them.

Now this week, Apple reportedly had 46 more patents granted and published. But the patents, some of which are described in a VentureBeat article, don’t appear to indicate anything grand, just perhaps a new way to open an iPhone or iPad or a different method to use “push-to-talk” technology similar to Nextel phones.

Because Apple at its core is its own technology company, it seems unlikely it would buy another company that does anything similar to what it already is doing. It reportedly eyed Square, though Google may have the inside track on acquiring that company, if such a deal were to occur. Square gained its fame by enabling iPhones initially to be used to accept payment cards. It’s likely Apple would want to look further into the future, avoiding plastic altogether, so Square doesn’t seem a good fit.

Apple also likely would not want to participate directly in the payments ecosystem but instead serve to support it in other ways, such as through NFC or it’s iBeacon technology. It’s also possible none of the “alternative” payment solutions seeking their own viability has hit Apple’s threshold either, including those supporting QR codes, even though Apple’s Passport service would indicate a preference in that technological direction.

Perhaps when a payments technology eventually hits Apple’s threshold for support, Apple will use its cash to acquire what it needs to support it. Or maybe it will buy the technology outright.

Again, Apple has us all playing a game of wait and see, and it’s for that reason we’ll all have to sit back and do just that.

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NEW PYMNTS STUDY: ACCELERATING THE REAL-TIME PAYMENTS DEMAND CURVE – NOVEMBER 2020

About: Accelerating The Real-Time Payments Demand Curve:What Banks Need To Know About What Consumers Want And Need, PYMNTS  examines consumers’ understanding of real-time payments and the methods they use for different types of payments. The report explores consumers’ interest in real-time payments and their willingness to switch to financial institutions that offer such capabilities.

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