Apple unlikely to move into payments

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Apple is unlikely to jump into the mobile payments market at the physical POS, as PayPal is doing – there’s not enough profit in it for Apple, contends the head of the PayPal Mobile unit.

David Marcus, vice president of PayPal Mobile, speaking during a panel discussion at Mobile World Congress in Barcelona, was asked if he saw Apple making a run at offline payments using its massive iTunes account base, as PayPal is attempting to do with its base of 106 million users – writes Dan Balaban.

Marcus responded that many other very large companies have ‘failed miserably’ when they tried to launch a new payment scheme. ‘In the case of Apple, you’re right, Apple has 220 or more million users that have payment credentials on file to buy stuff on iTunes,’ Marcus said. ‘Could they play in this space? Sure. I just think if you look at the profit margins of Apple and the DNA of Apple, shifting in payments doesn’t make any sense.

‘If they were wildly successful in payments, in terms of transaction margins, it won’t represent the profit margin that they’re doing on one single new iPod model.’

Any move into payments in the offline world by Apple would compete directly with PayPal’s well-publicized plans to try to crack the market for physical-world payments, where more than 90% of consumer retail spending is done in the US.

Although a topic of much speculation, Apple has given no real signals that it plans to use iTunes to launch a new payment scheme at the physical POS to compete with Visa, MasterCard and other payment networks, including PayPal.

Other competing wallets or mobile-payment services are sure to spring up. The Wall Street Journal, for example, reported today that US retail giants Wal-Mart and Target, along with other merchants, are working on a mobile-payments system, though few details were available. It also wasn’t clear whether the project is just in the talking stages.

‘I don’t think there is a ton of incentives for Apple to move into that space,’ Marcus said. ‘(And) Apple doesn’t do well in the B2B market. They build consumer electronic devices.’ If Apple were to take the plunge into mobile payments at stores and other physical merchant locations, they could do it either with NFC, as Visa and MasterCard are supporting, or with cloud-based payment, which PayPal is using now for its bold move into the market.

But besides having to accept much lower profit margins, Apple would also have to submit to more government regulation and, of course, would have to build some type of acceptance infrastructure with hundreds of thousands or millions of merchants, other observers have said.