Mobile payments could hold the key to Apple's next $100 billion

 

Apple has been a near permanent fixture in the headlines since the launch of the original iPhone in 2007, but this month the company received special attention when its market cap topped the $600 billion mark and it was made known it had more than $100 billion in cash reserves.

Predictably, a plethora of comparisons began to be drawn around Apple's worth and you can find an eye-watering listhere. Some choice examples include the estimates that put Apple's value above that of the global coffee industry and the international illegal drugs trade.

The position that Apple has now, not just financially but also within the hearts and minds of the modern consumer, gives it the perhaps unique ability to enter new sectors and make them "Apple" in a way that feels completely natural to us -- and by making them "Apple", I mean of course beautiful, desirable, easy-to-use and hugely profitable. Alternatively they also have the option to dip their toes into new markets without the need for much innovation on their part. When businesses are dependent on your ecosystem for continued growth, new ways can always be found of ensuring that their growth results are inexorably tied to yours and this generates fresh revenue streams in the process.

During the recent era of Apple's ubiquitous media presence, the concept of digital payment for goods and services has been threatening to bubble to the surface and is quickly gaining pace.

Since Square's launch in late 2010, the number of middleware services entering the transaction market has been picking up steam and I'm a big fan of anything that resembles innovation in this sector. It's dumbfounding that the security around US card transactions in 2012 is still so lax that merchants hand you back your card before you've even signed the receipt. When my brother first moved to New York, he found this so ridiculous he started to leave a different signature on every receipt, from describing his role in the transaction e.g. "customer" to simply a word for the thing being paid for e.g. "brunch". Have a look at his collection of non-legally binding signatures to get a sense of how "hard" it is to commit credit card fraud in the US.

In my role as a Digital Strategist at TH_NK, I've been watching with interest the progress of businesses like Square, iZettle, PayPal and MPowa in recent months and I can't help but notice the emphasis they put on Apple products both in terms of device support but also in terms of the imagery and language they use in their communications. Looking through their websites, you could be forgiven for assuming they were in the business of selling Apple hardware, and actually they are. As a small business owner, you're going to be conscious of the fact that you're asking people to swipe their credit cards through a tablet which in itself might be a turn off. But to what extent would that feeling be exacerbated by presenting your customers with an Android tablet which they don't immediately recognise?

So where does Apple fit in?
Skimming off the top: Apple has a reputation for collecting their dues from businesses that make money from their platforms. 30 percent from iTunes and App store purchases, 30 percent from in-app subscriptions, 30 percent, 30 percent, 30 percent. How long will it be before Apple start looking for their cut of the 2.5-2.75 percent transaction fees that the likes of Square charge for their services? I think they will wait at least until these middleware products start to turn a profit. Latest estimates suggest that Square is still making an operating loss of $100,000 per day despite processing $11 million in the same time frame. Apple has nothing to gain in the short term by killing off these businesses which are still finding their feet and could prove to be fruitful partners if nurtured in the short term.

Bringing a gun to a knife fight
The interest in products like the iCache Geode suggest that there is a real consumer appetite for converting a wallet full of debit cards, credit cards, loyalty cards, identity cards and so on into a single, easy to use, digital solution. No matter how much I love the Geode, I can't help thinking it's nothing more than a sticking plaster on a problem that someone will solve very soon. Now if only there was a business that held a high level of consumer trust, wasn't tied down to a single financial institution and had access to our pockets 24 hours a day. They could really shake things up if they had the stomach for it...