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How Apple could shake up mobile person-to-person payments

As millennials increasingly use their mobile devices to make small payments to one another, P2P payments have attracted a number of companies, from early pioneer Venmo to more digital giants such as Facebook and Google. Now Apple is reportedly looking to throw its hat in the ring as it looks to drive adoption of mobile payments more broadly and to fill out its mobile services ecosystem.

“A consideration to drive adoption of Apple’s service might be cost and if they can become the least expensive mobile P2P service for consumers,” said Talie Baker, an analyst at Aite Group.

“The market is pretty much wide open, no one player is currently dominating the space so there is a good opportunity for Apple given their market penetration and consumer comfort with Apple products,” she said.

Bill sharing
While mobile payment adoption overall has been slow, P2P mobile payments have gained some traction with millennials looking to share bills, such as when they go out to dinner. Apple may be looking to gain a foothold in P2P mobile payments to support its Apple Pay service.

According to a report in The Wall Street Journal, Apple is in discussions with a number of major U.S. banks about a potential P2P service. This suggests that the service would enable users to make payments from their checking accounts to another person.

An Apple P2P service could be integrated with the company’s Apple Pay, which enables users to pay for purchases in stores and online.

Apple may be looking to launch the service as early as next year.

Competitive landscape
Apple would face a number of competitors on this space.

Venmo, an early player, is now owned by PayPal and accounts for 19 percent of mobile P2P payments.

Google’s new Wallet also offers P2P payments and Facebook launched a similar service through its Messenger app earlier this year.

Square also plays in this area.

“Apple faces a highly competitive and fragmented competitive ecosystem,” said Jordan McKee, senior analyst for mobile payments at 451 Research. “Apple will be one of many providers, and will face difficultly in displanting fast-growing services, such as Venmo.

Despite the competition, Apple could bring some key advantages to P2P mobile payments.

“Apple has a unique opportunity to tightly integrate P2P payments into the overall device experience – something no provider has the capability of doing today,” Mr. McKee said. “It’s easy to see how Apple may layer P2P payments over iMessage, creating a compelling and intuitive service.

“Apple can also push P2P payment functionality down to an iPhone via a software update, whereas other providers have a more tedious path to drive adoption,” he said.

“Should Apple enter the P2P payments sector, this will create a shockwave across the competitive landscape. While Apple has been known to drive attention and adoption toward specific sectors that it enters, it’s as equally as well known for disintermediation.”

Driving mobile payments adoption
One benefit of a P2P payments service for Apple would be to help drive adoption of mobile payments and help boost its Apple Pay service.

In some cases, consumers more readily adopt P2P mobile payments as opposed to using their devices to pay for purchases in a store.

The thinking goes that once they discover how easy it is to pay with their phones, they may be more likely to adopt mobile payments to purchase merchandise and services in stores and online.

Aite’s research showed that only 40 percent of millennials used a mobile payment method in 2014 and other generations used mobile payments even less.

“Consumers are looking for convenience and the more they become comfortable with transactions on their phone, the more likely they are to continue using the phone for new functionality,” Ms. Baker said. “If they become comfortable with mobile payments to merchants, that will help drive mobile P2P and vice versa.

“It will be interesting to see which one takes off more strongly first,” she said.

Final Take
Chantal Tode is senior editor on Mobile Commerce Daily, New York