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Commerce


Apple may finally appear serious about facilitating the purchase of physical products in retail stores through its devices — and that has gotten the attention of at least one potential major competitor.

Three payments industry executives tell Re/code that eBay-owned PayPal has been pitching Apple on helping the consumer electronics maker bring its long-rumored payments initiative to fruition. These people, who have spoken to contacts at both Apple and PayPal, say that PayPal is essentially willing to white-label parts of its payment service to be used in an Apple mobile payments system — anything from fraud detection to back-end infrastructure, even possibly down to the processing of payments.

“They’re telling them, ‘We’ll do it in the background,” one of these people said. “Basically, it’s just, ‘We want to be a part of this.'”

Two of these people said it’s unlikely Apple would find any need to link up with PayPal, though they would not rule out the possibility.

These sources say that Apple is finally committed to having iPhones play a central role in the purchasing of goods at brick and mortar stores, though it’s not clear yet which technologies Apple will employ to make these transactions a reality nor how big of a role Apple wants to play in retail commerce. At the same time, a recent Apple patent application mentions the use of technologies such as near field communication, Wi-Fi and bluetooth to enable in-store transactions, and the launch of the iBeacon protocol hints at Apple’s  ambition to play a central role in the shopping experience at a wide range of retailers beyond the checkout counter.

This could be a scary proposition for PayPal if it doesn’t figure out a way to partner with Apple. The eBay subsidiary has been investing in a series of new products and ways for PayPal customers to use its service in retail stores to try to grab a piece of brick-and-mortar transactions, which still make up anywhere from 85 percent to 95 percent of total commerce transactions. And while PayPal’s initiatives are admittedly in their early stages, Wall Street is watching them closely, viewing them as one path toward a new avenue for growth for PayPal and eBay on the whole.

Apple spokeswoman Amy Bessette and PayPal spokeswoman Jennifer Hakes declined to comment.

The Wall Street Journal reported last week that Apple’s Eddy Cue has been meeting with industry executives “to discuss Apple’s interest in handling payments for physical goods and services on its devices,” though the article didn’t specify whether these payments would happen in stores or on other retailers’ websites or apps.

Sources say Apple has its eyes on both avenues, and it’s clear why. The company announced a year ago that it had 575 million iTunes accounts, the majority of which were linked to a credit card. That means, if it wanted to, Apple could figure out a way to roll out a “Pay with Apple” button, or something like it, across the Web and mobile apps, immediately letting hundreds of millions of consumers pay for any type of purchase easily with the payment method connected to their iTunes account. Industry sources expect Passbook, Apple’s digital wallet that can store electronic versions of items like airplane boarding passes and movie tickets, to play a role.

The new iPhone 5s is also equipped with a technology Apple calls Touch ID that could play a part in the payments system, these people said. Touch ID lets iPhone owners use their fingerprint as a password to take actions such as unlocking the phone and, perhaps more interestingly, authorizing the purchase of apps and digital content from the iTunes store.

On an earnings call with analysts, Apple CEO Tim Cook did not confirm Apple’s intent to help facilitate purchases in the stores or on the websites of other retailers, but he spoke pretty candidly about why creating a wide-reaching Apple mobile payments system could be “a big opportunity.”

“[W]e’re seeing that people love being able to buy content, whether it’s music or movies or books, from their iPhone, using Touch ID. It’s incredibly simple and easy and elegant. And it’s clear that there’s a lot of opportunity there.

“The mobile payments area in general is one that we’ve been intrigued with and that was one of the thoughts behind the Touch ID. But we’re not limiting ourselves just to that.

“So I don’t have anything specific to announce today, but you can tell by looking at the demographics of our customers, and the amount of commerce that goes through iOS devices versus the competition, that it’s a big opportunity on the platform.”




1 comments
PhilipCohen
PhilipCohen

That a professional company like Apple would consider partnering with a clunker like eBay's "PreyPal" is too funny, regardless ...


Amazon Payments, Apple Payments, Whoever Payments—online or at physical point of sale—they all suffer from the same severe handicap that “PreyPal” suffers: none have direct, dynamic access to retail banking debit accounts, nor retail banking credit accounts as do the MasterCard and Visa “bankcards”; their only access to funds is as retail bank credit card merchant account operators (which is what “PreyPal” claims to be when it wants to appear to be not operating as a “bank” in its own right) via their own retail bank (Wells Fargo in the case of “PreyPal”).
 
Even if these middlemen make use of direct debits via the ACH system (as “PreyPal” prefers to do) to more cheaply access buyers’ funds, the access is not dynamic: there is no immediate approval response from the bank nor any guarantee that, the following day, the bank won’t reverse the debit due to an insufficiency of funds; direct debits via ACH are simply not suitable for physical point-of-sale transactions; the only safe route for point-of-sale transactions (credit or debit) is via a retail bank Merchant Account with its dynamic linking to the banking system …
 
Regardless, these “pretenders” are all parasitic middlemen; a superfluous additional layer, in the main, riding precariously on the back of the retail banks’ existing systems; they make their money out of the difference between what the banks/MasterCard/Visa charge them and what they then charge their merchant customer; therefore, their services, invariably, are going to be dearer, or are unlikely to be cheaper; anyone that thinks otherwise has been drinking too liberally of the disingenuous nonsense that continually flows from the eBay Dept of Spin …
 
“PreyPal”, however, is unique in that it operates an unlicensed  “pretend” bank—the “bank” they have to hold onto people’s receipts, and the bank they don’t have when the banking regulator comes sniffing around. That “PreyPal” manages to skirt around US banking regulation while operating this clunky, unregulated, non-FDIC-insured, “pretend” bank, frankly, defies belief; it’s probably the same bureaucratic laziness/corruption that allows eBay to knowingly and calculatedly facilitate blatant, massive, auction fraud on the consumers of the world …
 
Regardless, if any of these middle-men players think that they are going to take other than micro-fractions, if any, of the payments market away from the MasterCard and Visa “bankcards”, I think that they have been poorly advised, or maybe they have accompanied the hallucinating Johnny Ho on one too many his many trips with Alice down the rabbit hole to Wonderland …
 
Anyway, with the recent arrival of the “professional” digital wallets from MasterCard and Visa, all these other pretenders (with the exception of where they are effectively mandated/integrated into an online marketplace) are now effectively redundant …
 
And, with respect to physical point of sale in particular, how many times does it have to be suggested, next time you visit The Home Depot, ask a cashier how “Pay Here With PayPal” is going—LOL … 
 
Hello "MasterPass"; goodbye clunky "PreyPal"—it has not been nice knowing you ...



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