Apple Inc. is in discussions with U.S. banks to develop a mobile
person-to-person payment service that would compete with PayPal
Inc.'s popular Venmo platform, according to people familiar with
the talks.
The talks are ongoing, and it is unclear if any of the banks
have struck an agreement with Apple, these people said. Key details
remain in flux, including technical aspects that would determine
how the service would tie into the banking industry's existing
infrastructure, they said.
The service under consideration would allow consumers to zap
payments from their checking accounts to recipients through their
Apple devices. The service would likely be linked to the company's
Apple Pay system, which allows customers to make credit-card and
debit-card payments with their mobile phones.
A launch isn't imminent, but one person said such a service
could get off the ground next year.
Apple has been talking with a number of banks about the service,
including J.P. Morgan Chase & Co., Capital One Financial Corp.,
Wells Fargo & Co. and U.S. Bancorp.
The move is another effort by Apple to tighten its hold on
customers by getting them to use their iPhones for everyday needs,
including financial services.
It also represents the latest attempt by banks and other
providers to shift Americans away from cash and checks, which are
still the most popular methods that people use to make payments to
one another.
A slew of other Silicon Valley giants are also trying to get
consumers to make the shift. In addition to PayPal's Venmo service,
person-to-person payments are also offered by Google Inc., payment
startup Square Inc. and Facebook Inc.
Venmo is one of the fastest-growing services, now accounting for
19% of mobile person-to-person payments, according to a report from
Aite Group LLC, a consulting firm that focuses on the payments
industry.
It is favored by young American adults who particularly like a
feature in which they can list their payments on a social media
feed—noting for friends when they shared a dinner check or for
roommates when they paid a utility bill, for example.
Sending money is free through Venmo when pulled from a linked
bank account, but there is a 3% fee on credit cards and some debit
cards. Receiving money through the Venmo app is always free.
Consumers made $2.1 billion worth of mobile payments using Venmo
in the third quarter, up from $700 million in the year-earlier
period, according to PayPal.
Still, mobile payments—whether to a business or an
individual—haven't gained much traction even though a growing
number of Americans are aware that they can use their phones to pay
for goods and services.
Fewer than one in five North Americans use their mobile phones
to make at least one payment a week, according to a report issued
last month by Accenture. The study was based on a survey of 4,000
smartphone users.
"The market is still wide open for mobile person-to-person
payments," says Talie Baker, an Aite analyst.
One of the options being considered by Apple is to hook into an
existing person-to-person payment service called clearXchange that
is already offered by the nation's banks, according to a person
familiar with the talks. The service, which has recently been
overhauled and expanded, lets people use their checking account to
send each other money with an email address or cellphone
number.
It isn't clear how Apple intends to make money from the service.
Indeed, the company may view a person-to-person offering mostly as
a way to get more consumers to convert to its phones.
Under the current discussions, Apple wouldn't charge the banks
for participating in its person-to-person payment service, said the
person familiar with the talks. That is different from Apple Pay in
which the banks pay Apple for each transaction.
Apple has also added other services, including its new streaming
music service, aimed at keeping the iPhone central to customers'
lives. The goal is to one day eliminate the need to carry a wallet
or any other device other than the iPhone.
Apple introduced Apple Pay in Oct. 2014. Over the last year, it
has steadily added banks and merchants willing to accept Apple Pay.
It is become a more crowded field with Alphabet Inc.'s Google and
Samsung Electronics Co. rolling out mobile payment services of
their own.
Facebook introduced peer-to-peer payments through its Messenger
service in March. Once a user adds a debit card to its Facebook
account, they can send money through the chat window.
Google Wallet allows users to send payments to each other via
debit card through email. Square also allows peer-to-peer payments
using debit cards to users who have created a "$cashtag" account
with the service.
Apple Pay is more widely known than other mobile payment
options, but it is still in its early stages. Of eligible Apple Pay
users, only 13% said they had tried the service, according to a
June survey conducted by PYMNTS.com, a payments industry news site,
and InfoScout, an analytics firm. That figure was down from 15% in
March.
Apple has said it has 2,500 U.S. issuing banks supporting Apple
Pay and it expects more than 1.5 million locations to accept its
payment service by year-end.
Last month, Apple Chief Executive Tim Cook said Apple Pay
transactions are growing by more than 10% "month after month." He
said Starbucks will start accepting Apple Pay at all of its U.S.
stores in 2016.
There have been security concerns about the multiple new ways
for consumers to send money. The Federal Deposit Insurance Corp.
last year warned consumers that person-to-person services can carry
fees and privacy risks, particularly if there is a social media
aspect to them.
The FDIC also encouraged consumers to consider a
person-to-person payment service that is owned by a bank rather
than one that is provided by a third party. The agency noted that
funds held in a bank account are insured by the FDIC, while other
providers may not offer that protection.
Most person-to-person services require the consumer to set up an
account and identify a payment source, such as a checking account.
The sender must have certain information of the recipient, often a
telephone number or email address, before they can send a
payment.
In a report issued last week, Aite estimated that U.S.
households made more than $1.2 trillion worth of person-to-person
payments last year. The payments, most of which were made by cash
and checks, range from gifts to shared restaurant bills to
alimony.
Nearly half of all person-to-person mobile payments were made
through mobile banking applications, according to the Aite survey
of 1,724 U.S. consumers.
-Daisuke Wakabayashi contributed to this article.
Write to Robin Sidel at robin.sidel@wsj.com
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(END) Dow Jones Newswires
November 11, 2015 16:15 ET (21:15 GMT)
Copyright (c) 2015 Dow Jones & Company, Inc.
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