Silicon Valley continues its foray into payments last week, with Apple buying Canadian start-up, Mobeewave for $100m. The company, based in Montreal, builds software that allows smartphones to become payment terminals without any additional hardware or accessories and includes huge Android handset manufacturer, Samsung as an earlier investor.

If rolled out, this would allow Apple to compete directly with companies like Square and i-Zettle by turning iPhones and iPads into card terminals out of the box and provide merchant-facing, Apple-branded payment services to go alongside their consumer-facing products like Apple Card (issued by Goldman Sachs) and Apple Pay within the device. Of course, once an organisation is the provider for both ends of the transaction, it has a lot more control over how that transaction is processed, enabling the possibility of closed-loop payments which do not necessarily move across traditional card networks. It also marks the first concrete sign that the “phone as a terminal” market is moving from the domain of niche innovation to the mainstream.

Apple’s move is another example of technology-led companies disintermediating incumbent banks and payment providers. So far in the last year:

  • PayPal and Square have expanded from their respective core payments businesses to include such products such as merchant cash flow advances and business bank accounts. Both companies received federal licenses to disperse the US economic relief packages to small businesses as fears remain that traditional processes will take too long to administrate.
  • In 2020, Shopify launched a consumer companion shopping app to promote small businesses, and announced it would be white labelling a business bank account and offering it to its customers.
  • Amazon announced in 2020 that they would be offering business financing – with the back end provided by Goldman Sachs.

This remains a fascinating space to watch.  It will be interesting to see who makes the next move, and whether banks and payment processors are content to be squeezed further down the value chain away from the merchants, the consumers and the data ownership.

Since publishing, Apple have announced they will allow iPhones to accept contactless payments. According to Bloomberg, Apple could start rolling out the feature through a software update in the next few months, bringing the prospect of closed-loop payments which do not necessarily move across traditional card networks even closer.

By our payments advisor Nick Telford-Reed.