Banks and fintechs will have to get used to it: Apple (AAPL) should soon become their competitor. The tech brand has made services one of its most important growth areas.
"We continue to invest in innovation across our services business, which set another all-time revenue record last quarter and performed even better than we had anticipated," CEO Tim Cook told analysts during earnings' call in January.
Apple posted record revenues of $124 billion for the three months ending in December. Services revenues, which includes payments, rose 24% to a record $19.5 billion. Services gross margin was 72.4%.
"The growth of Apple Pay has just been stunning. It's been absolutely stunning. And there's still obviously a lot more there to go," Cook explained. "And because there's still a lot of cash in the environment. And so I think that both of these and whatever else we might do have a great future ahead."
It seems that Apple is determined to attract this money. The iPhone maker is in the process of developing a project called "Breakout", which aims at replacing its Fintech partners, according to Bloomberg.
Specifically, Apple is working on payment processing technology and infrastructure for future financial products. The company wants to offer a wide range of financial products and services ranging from payment processing, financial risk assessment for loan transactions, fraud analysis, credit verification and risk and dispute management with clients.
Apple didn't return a request for comment from TheStreet.
Apple
Apple Is Becoming a Fintech Powerhouse
If the economic model of this new service remains uncertain for start-ups, the question does not arise for tech giants. Those who venture into the payment market do so primarily to retain their members and amortize their costs in other ways. According to experts, they are also attacking this market in the hope of recovering financial data on consumers, useful for developing other services.
If Apple materialized all these projects, the company would become a true fintech powerhouse.
Apple has already been present in mobile payments since 2014 and the launch of Apple Pay, which makes it possible to pay at merchants. The company also offers a peer-to-peer payment service, Apple Pay Cash, which is operated by Green Dot Bank on behalf of Apple.
Apple's Wallet app allows users to add, use, pay with their credit and debit cards, add discount vouchers, loyalty cards.
Apple's finance offensive gained momentum in February with the launch of a game-changing product in payment services.
The firm introduced Tap to Pay functionality. The concept is very simple: instead of using a dedicated payment terminal, the iPhone lends its NFC chip to authenticate the transaction. The iPhone screen displays the amount to be paid and a small NFC logo to indicate to the customer where to affix their iPhone, Apple Watch or NFC-compatible bank card.
Apple Pay Later?
The rest works like a classic contactless transaction. The Tap to Pay functionality, resulting from the takeover of the startup Mobeewave two years ago, was developed in partnership with financial institutions which will be able to offer this option to their business customers.
Stripe will be the first to offer the feature to its customers this spring, with integration with Shopify (SHOP). Apple said that other payment platforms and applications are planned later this year. Apple Stores will also use this feature in the coming months.
Merchants must rely on additional hardware, such as Square's external terminal, to accept contactless credit card payments. With Tap to Pay, Apple is attacking this market head-on, or in any case offering an alternative option for small businesses, single-person sellers and other independents.
Apple specified that it will require an iPhone XS or a later model to support Tap to Pay .
Apple is also working on a subscription service for the iPhone and other hardware products, a move that could make device ownership similar to paying a monthly app fee. The service will enable users to subscribe to hardware, rather than just digital services.
Finally, the Cupertino, California-based company is working on a new product/service, called Apple Pay Later. Basically, a kind of loan that could be repaid in at most four installments without interest for short-term transactions and with interest for long-term transactions.
