Apple's Breakthrough into Contactless Payments

April 22, 2022

For years now, Near Field Communication (NFC) technology has been sweeping the national and global economy. So it's not surprising that Apple, Inc. has just announced plans to implement their new Tap to Pay software on new iPhones, as part of their effort to continue shaping the future of smartphone technology and financial services across the world. 

Contactless Payments

While contactless payments are fairly common nowadays it was only first used in America in the early 2000s. However, the safety and ease that contactless payments like Tap to Pay provide have increased in popularity due to COVID-19. These systems allow vendors to quickly and securely accept payment without the use of additional hardware or payment terminals.

So it's no surprise that businesses are quickly finding new ways to utilize this technology, including Apple. Apple recently released that, US merchants will be able to accept Apple Pay and other contactless payments simply by using their iPhones.

This new NFC technology would certainly benefit small business owners who will no longer have to purchase external hardware and payment terminals from companies like Clover or Square. And since an estimated 1 billion consumers use iPhones this takes a large percentage of potential customers from these companies.

Stripe is Apple’s first partner in launching this new technology, which might create some fluctuation and tension in the payment processing market, which Square currently dominates. Apple’s decision to use Stripe as their first payment platform to support Tap to Pay, as well as the inevitable drop in sales for external payment processing terminals and hardware, suggest that Square’s position in the market could be in jeopardy. 

Apple and the Fintech Industry

In 2020, Apple purchased Canadian tech start-up Mobeewav for $100 million, to acquire the exclusive rights to this NFC technology. Mobeewav’s NFC technology previously allowed customers to process contactless payments, without the use of external hardware, on their smartphone via the Mobeewav app. Now with Apple’s acquisition of their patented technology, this capability will be built right into all future iPhones with no additional app download required.

Apple often comes under fire for their pattern of acquiring up-and-coming technologies and tech start-ups under their massive corporate umbrella. A recent report published by Democrats in the House of Representatives, and a subsequent Antitrust Hearing, condemned Apple, Google, Facebook, and Amazon as “companies that once were scrappy, underdog startups that challenged the status quo have become the kinds of monopolies we last saw in the era of oil barons and railroad tycoons.”

Apple CEO Tim Cook has said that Apple’s acquisitions are not in the interest of cornering the market or creating a monopoly; these acquisitions only serve to provide iPhone users with the most innovative and cutting edge technological advancements, right in the palm of their hands. 

Apple to Become Fintech Powerhouse?

In addition to embracing innovative NFC technology, Apple has set its sights on expanding its breadth of fintech offerings. In an effort to reduce reliance on external partners like Goldman Sachs, Apple instituted a multi-year plan, deemed “Project Breakout”, which aims to develop new technology and infrastructure focused on providing financial services for iPhone and Mac customers.

These new financial tools can include investment risk assessment, lending and fraud analysis, and conducting credit checks. Last week, Apple purchased the UK Fintech start-up Credit Kudos, a lending advisement tool popular among small businesses.

As Apple continues widening its reach into the world of finance, and acquiring new technologies to implement in iPhones, they could not only corner the technology market but also give banking and financial institutions a run for their money.

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