Apple Payments Expose Ambitions in Banking

The Apple fanboy population is still soaking up the fruits of recent announcements, that included the iPhone 6, iPhone 6 Plus, iWatch, Apple Pay and the upcoming iOS 8. What more could the loyal fan base want from their spiritual leader? Or did the September 9th announcements give us a peek into the future potential of a company that has risen to popularity by challenging the status quo. Like any publicly listed company, I doubt we have seen the end of Apple challenger mentality. Thus making the important question; what next? As a reformed banker and innovator myself, I see a pattern. One that will wake some sleeping giants with deep pockets, as they see a real threat to their incumbent positions.

During the September 9th event, Apple announced Apple Pay, one of their strongest move into the payments business. I say strongest, because this isn’t their first. The Apple Account infrastructure has been actively driving mobile payments for years now. With transaction volumes in the billions.

Through Apple Pay, Apple have thrown down the gauntlet to existing payment platforms like Google Wallet, Square and PayPal. But before Apple to launched its answer to the wallet, sources from tech blog TechCrunch suggest Apple was actively working on an acquisition of Square. Square’s beautifully designed, simplistic payments platform would have been the perfect fit for the world of Apple. And would have seen the on boarding of the popular “Next Steve Jobs Nominee” Jack Dorsey into the Apple ranks. Its rumoured Apple executives failed to put enough cash into the deal, that Square eventually walked away from. Apple may have under bid in an attempt to leverage recent ‘poor performance’ rumours. But anyone close to the space can see the clear value of Square’s business to disrupt a global industry.

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The acquisition is logical, strong and in my opinion inevitable. Square’s software ecosystem approach that now plays a significant role in the point of sale merchant market of the US has been seen many competitors attempt to copy their success. Demonstrating a clear trend within the industry. Imitation is always the best flattery. Its for that very reason I know Apple will come back to the table.

“Apple wanted the company to come aboard, according to one source, but the discussed price was a sticking point: The tipster held that Apple wanted to buy Square for less than half of the $6 billion valuation it eventually would raise at (around $3 billion). Square, valued at the time at a firm 66 percent delta to that price point, declined to accept.”

With Apple Pay in the market, Apple will play a significant role on the consumer side of payments within a short period of time. But that only gives them half the equation. The secret to disrupting payments lies in owning both the consumer and the merchant. Something Apple strategists will be very aware of. Square’s deep integration with merchants would allow the unlocking of the payments holy grail; the purchasing data. Something global giants like Amazon and Google know hold the key to future commerce markets.

Square recently raised a new $100 million of funding rumoured to be linked to Singapore GIC, bringing Square’s valuation to $6 billion as the company is rumored to be heading for an IPO in the near future. An IPO that I feel won’t be allowed to happen, as market giants fight for future market dominance.

It’s crystal clear to me, Apple acquiring Square shows us all Apple’s ambitions in the financial services industry. And I wouldn’t rule out Apple buying a bank license to strengthen the ecosystem, it’s been done before.