Apple to enter payments? Any basis in truth or just a rumor?
The future projects of the GAFAM have been a source of conjectures for years. Facebook tried to play a role in payment with Diem, and then killed the project. Amazon proposes Amazon Pay. Google and Apple have set up Android Pay and Apple Pay. Some of us may even remember Microsoft Windows for Smart Cards. So, what's next?
As was expressed a few thousand years ago by Lao Tzu: "Those who know don’t talk. Those who talk don’t know." Consequently, analysts have an open avenue for commenting, making hypotheses, etc.
Google had already allowed a full access to its NFC chip, allowing to use an Android phone as a payment terminal in a transaction, a concept called SoftPOS. Apple followed suit earlier this year with its "Tap to Pay" feature, which unlocks some access to Apple's Secure Element in iPhones, thus allowing developers to use iPhones as payment terminals. This evolution is probably a significant step towards the end of the mPOS. One may remember Apple also launched the Apple Card in 2019, in association with Goldman Sachs in the US.
So, what's next?
According to Bloomberg, "Apple is developing its own payment processing technology and infrastructure for future financial products," in order to reduce its dependency on third parties, namely financial institutions both as issuers and acquirers, processors, risk management platform vendors, etc. Apple is said to be willing to have its own proposal for "payment processing, risk assessment for lending, fraud analysis, credit checks and additional customer-service functions such as the handling of disputes," says Bloomberg. However, they conclude that Apple might just bring additional services while keeping on relying on existing players for most services.
The entry of the GAFAM, especially Apple, has been raising the specter of the emergence of a strong and attractive competitor in the otherwise quiet payment ecosystem.
Payment is generally not regarded as an attractive industry; most of us know what all the different businesses in the payment chain mean. Transaction processing is an activity requiring highly secure and reliable industrial installations that have to be close to customers, and that turns a very low profitability, which, on top of it, is on a shrinking trend under pressure of the American and European regulators.
Payment card issuance is often seen as a burden for financial institutions, as they have no expertise in dealing with physical objects and all the service aspects of card issuance. Transaction acquisition is also an industrial activity, that has a low profitability level.
Seemingly all the GAFAM have made these analyses over years and, in spite of nice and flashy projects, not much has materialized. Will Apple bring a disruption, or will their projects end up in integrating small pieces of the payment chain while leaving the rest to established professionals?