What’s Apple’s New Strategy for Mobile Payments?

Apple PayApple launched its mobile payment platform in late 2014, and since then the company’s partnered with 2,500 U.S. issuing banks and will be available at 1.5 million retail locations by the end of the year. Apple CEO Tim Cook recently said that Apple Pay transactions are growing 10% “month after month.”

Image credit: Qualcomm.

Image credit: Apple.

But making payments at at physical and online retail locations isn’t Apple’s only mobile payments strategy. According to recent reports by the Wall Street Journal and Re/code, Apple is gearing up for a new feature that will allow iPhone users to transfer money to each other using Apple Pay.

A new mobile payment option

Image credit: Apple.

Apple is reportedly in talks with banks right now and is considering going around Visa and MasterCard, and may instead cut its own deals with banks for the payment processing. Nothing has been confirmed yet, but if Apple did indeed want to set up payments without the major credit card companies it could do so using clearXchange.

Going around credit card companies

Image credit: Apple.

Using this system would allow Apple to quickly integrate iPhone-to-iPhone payments because many banks are already using it. ClearXChange was set up by U.S. banks in 2011, in order to bring person-to-person payments to mobile devices. It is now the largest bank-offered digital payments network in the U.S., reaching 50% of all mobile and online banking customers. ClearXChange is equally owned by Bank of America, Capital One, JP Morgan Chase, U.S. Bank, and Wells Fargo.

Why use clearXChange?

Image credit: clearXchange.

Apple hasn’t made a decision yet whether or not it’ll use clearXchange for its own payment service, and there’s at least one major drawback if it does. ClearXchange is currently only available in the U.S., so Apple would have to use a separate system and negotiate with other banks if it launched the new service internationally.

Not a done deal yet

Image credit: Apple.

BI Intelligence estimates that the mobile person-to-person payments market will hit $174 billion by 2019. In 2014, just 1% of all person-to-person payments were made via mobile devices, but the percentage is expected to hit 30% by 2019.

Apple wouldn’t likely make money from the service because it’s not going to charge iPhone users to send money. Instead, the company probably wants to create a payments feature that easily integrates into its own ecosystem through Apple Pay. This would allow Apple to add value to its devices, while hooking users even further into its services. If Apple can successfully launch a person-to-person payment service, then the company would be one step closer to replacing users’ wallets with an iPhone.

Why Apple’s doing this

Image credit: Apple.

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