Users able to make P2P payments through Apple iMessages
Payments made via an be made via the Apple Pay virtual card, with funds transferred through card network
Is Apple serious about payments or simply looking to expand its device market share by offering more features?
Point of View
Apple has released Apple Pay Cash, its new, person-to-person (P2P) payments service, into beta testing in the US. Apple Pay Cash allows users to send money to one another through iMessages. Transfers can be initiated directly in an iMessage, from a contact or by using Siri. Users can also request payment through iMessages, simply by asking for money or tapping on a request from someone.
Funds are transferred through the card network. Upon activating Apple Pay Cash, users are issued with a virtual card in their Apple Pay Wallet. Customers can load the virtual Apple Pay Cash Card with funds from another debit card or prepaid card already in their Wallet.
When making a P2P transfer, funds on the virtual card are used first. However, the user can opt to use an alternate card in their Wallet, prior to confirming a transfer. Likewise, if funds on the virtual card are insufficient, the remainder is drawn from an alternate card. Transfers from a debit card or the Apple Pay Cash Card are free, but those made from a credit card incur a 3 per cent fee. Funds are always received into a user’s Apple Pay Cash Card account.
The Apple Pay Cash Card can be used to make purchases just like any other card in the Wallet. A user can also transfer funds into their bank account. While P2P transfers and purchases are immediate, as they leverage the cards network, transfers to bank accounts are ACH payments and thus take up to three days to process.
Apple has partnered with Green Dot Bank to provide the payment services. Green Dot issues the virtual card and securely holds funds of up to US $20,000 per user, which are covered by FDIC deposit insurance. For the P2P service, Green Dot is the ‘merchant of record’ that accepts credit and debit cards. And as the issuer, it receives interchange revenue on purchases. Interestingly, this model allows any cardholder to access Apple Pay, as Apple does not need to negotiate separate agreements with financial institutions.
Apple Pay Cash is only available in the US at present. A number of competing P2P options already exist in the US, such as Venmo, Square Cash and Google Wallet, all of which leverage the card network. As such it might seem counterintuitive for Apple to introduce yet another card-based P2P service into the market.
However, potential Apple Pay Cash users are within easy reach of Apple – they are already device and software customers. And, rather than providing an entirely new service, Apple is simply augmenting its existing products. The flip side to this of course is that Apple Pay Cash cannot be used by non-Apple customers.
Furthermore, as it is widely held that P2P payments are not profitable, it seems unlikely that Apple is seeking to generate another revenue stream with Apple Pay Cash. Instead, perhaps it hopes to use the network effects of payments as a tool to maintain or expand its device customer base in the US, and potentially further afield. Indeed, Apple Pay Cash not being ‘hardware agnostic’ could be an advantage.
Even though the payments landscape here is markedly different from that in the US, with expected growth in e-wallets, could Apple consider extending the P2P service to Australia, given Apple Pay is not as widespread here as it is in other jurisdictions? What might the underlying funds transfer framework look like: would Apple use the card-based model, or perhaps the New Payments Platform?