Apple likely to lose money on person-to-person money transfers through Apple Pay

Posted:
in iPhone edited December 2015
If Apple does indeed get into rumored person-to-person money transfers via Apple Pay, the company stands to lose money on each transaction in the short term, accepting the losses as a way to further drive adoption of its mobile payment service, analysts believe.




Setting up and validating a new account could cost Apple between 50 cents and $3, on top of which Apple would have to pay at least 25 cents per transaction, research firm Crone Consulting commented to Bloomberg on Tuesday. In general companies such as PayPal don't generate much revenue from P2P, and pull in money from business transactions instead.

Any Apple involvement in P2P would likely just be a means of encouraging Apple Pay adoption, with the hopes of the increased usage spilling into retail. Crone speculated that adding P2P could double usage of Apple Pay by iPhone owners within 18 to 24 months. This is partly because P2P services are "viral" applications, meaning that someone sent cash through an app often has to register with the same app to receive it.

In November, Apple was reported to have spoken to several banks about P2P transfers. The company might even partner with an existing network, clearXchange, which already has the support of banks. In any case, Apple is not expected to charge financial institutions for personal transfers.

If it does enter the market, Apple will face stiff competition. Apart from PayPal and its Venmo subsidiary, which control much of the mobile payment space, companies like Square and even Facebook have entered into the arena.

Comments

  • Reply 1 of 13
    There's absolutely no reason to assume Apple would lose any money on such a service. Just more bloviation and muddying of the waters by unqualified "experts". ????
  • Reply 2 of 13
    mike1mike1 Posts: 1,900member
    Quote:

    Originally Posted by sog35 View Post

     

    This is silly.

     

    Apple also loses money on every iMessage.

    Apple also loses money on every iCloud email.

     

    This is another 'free' service that Apple loses money on to strengthen the ecosystem and sell more devices.


    Agreed.

     

    They are perhaps the only company that could lure people away from using a service that is already is offered by individual banks and that actually work quite well. Many people hate signing up for yet another service account, but a lot of people already have icloud accounts.

  • Reply 3 of 13
    Quote:

    Originally Posted by sog35 View Post

     

    This is silly.

     

    Apple also loses money on every iMessage.

    Apple also loses money on every iCloud email.

     

    This is another 'free' service that Apple loses money on to strengthen the ecosystem and sell more devices.


     

    Exactly. This is like saying grocery stores are losing money on bags.

     

    iMessage (for better or worse) has blurred the line to SMS for many unsophisticated users to the point that those who switch to Android may feel excluded because several of their iPhone friends use iMessage instead of SMS. I know three HS and college-aged people who switched back to iPhone just so their stupid friends could "text" them again.

     

    THAT is leveraging a strong product position for "free" software.

  • Reply 4 of 13
    eightzeroeightzero Posts: 2,366member

    Apple lost money on El Capitan, too. Think how much that cost to make and deploy, and they gave it away for free.

     

    I like AI, and learn a lot from it. But someone needs to hire an editor.

  • Reply 5 of 13
    mstonemstone Posts: 11,510member
    Quote:

    Originally Posted by eightzero View Post

     

    Apple lost money on El Capitan, too. Think how much that cost to make and deploy, and they gave it away for free.

     

    I like AI, and learn a lot from it. But someone needs to hire an editor.




    Well yeah but it is required moving forward as the OS for all new Macs. The free upgrade for existing customers just costs bandwidth.

  • Reply 6 of 13
    tenlytenly Posts: 707member
    This is ridiculous. Apple is likely to negotiate a way to provide this service such that it is free to operate and possibly even that it generates a small profit. If not - like others have said - it's a value add that Apple chooses to provide to its users in order to strengthen the ecosystem! A third party company releasing an article like this based entirely on speculation and not based on a single shred of evidence is the most ridiculous thing I've seen in a very long time. The author is a troll and I'm amazed that AI even printed it...!
  • Reply 7 of 13
    zoetmbzoetmb Posts: 2,453member

    Apple is an extremely cash rich company.    Here's an idea (and I'm sure some people with more knowledge of the industry will tell me why it's not such a good idea):   what if Apple set up their own bank?   They could then do their own deals with AMEX, MC, Visa, etc to lower transaction fees.   Or, they could even create their own Apple Credit Card (although maybe there's no actual card, since there's Apple Pay) that's not associated with any of the major Credit Card companies.

     

    Regardless, if Apple develops a great UI and system and that makes p-to-p payments easier, faster and more trustworthy, it's certainly something I would use instead of the services offered by my bank, which isn't executed all that well.

  • Reply 8 of 13
    nasseraenasserae Posts: 3,157member

    Right now it takes Apple 30 days after the close of the billing month for Apple to send developers their revenues. I don't believe Apple want to be in that position where they act as a middleman moving money from one person to another. Too much headache for them and I believe they want nothing to do with your bank account. You cannot even use bank account as iTunes payments (in the US at least). What makes more sense is opening NFC API to developers so payment processing services like PayPal, Square.. etc can use it for P2P payments including ApplePay. Maybe even require Apple Pay support to use the API.

  • Reply 9 of 13
    tenlytenly Posts: 707member
    There's obviously profit in being a bank. If Apple decided they wanted to expand into that business, they would probably buy a small USbank and thereby acquire all the necessary expertise, regulation compliance, etc... They certainly wouldn't avoid it because "it's too much of a hassle"! LOL. But I also don't think they would ever consider doing this unless they had a plan to disrupt the banking industry. They wouldn't just do it to operate as banks do now. I'd bet my bottom dollar that they've considered it. My guess is that they don't currently have a plan for a significant disruption - so for now, they pursue other businesses. I would not rule out the possibility of this happening in the future. Perhaps their new iPhone leasing plan is them dipping their toes into the banking waters. That coupled with Apple Pay, may bring them closer than we think... As a shareholder, I'd love it if they were able to find a good way to make all that cash work for them - however, with most of it located oversees, there are a lot of complications that have to be overcome or avoided - especially if any of that money were to be targeted for use in the US.
  • Reply 10 of 13
    nasseraenasserae Posts: 3,157member
    Quote:
    Originally Posted by tenly View Post



    Perhaps their new iPhone leasing plan is them dipping their toes into the banking waters.

     

    The iPhone Upgrade Program is not a lease. It is financing plan. Apple get paid from a third  party, a bank, and you make payments to that bank.

  • Reply 11 of 13
    gatorguygatorguy Posts: 20,764member
    There's absolutely no reason to assume Apple would lose any money on such a service. Just more bloviation and muddying of the waters by unqualified "experts". ????
    Here's an explanation from banking folks on why Apple might be interested in P2P payments.
    http://bankinnovation.net/2015/11/apples-p2p-service-could-be-a-play-to-win-banks-over-to-touchid/
  • Reply 12 of 13
    tenlytenly Posts: 707member
    nasserae wrote: »
    The iPhone Upgrade Program is not a lease. It is financing plan. Apple get paid from a third  party, a bank, and you make payments to that bank.
    Interesting. I didn't realize that. I thought they were self-financing the program.
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