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back to article Apple declares war on PAYPAL: Pay-by-bonk + iTunes = profit, right?

Apple is planning to take on Paypal with its own mobile payment system, it has been claimed. According to a report in the Wall Street Journal, Eddy Cue, the man in charge of iTunes and the App Store, has been meeting with industry bigwigs to discuss using iDevices to handle payments for goods or service. It is understood that …

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Bronze badge

They need to:

1-work with carriers to make it easy to lock down a stolen phone.

2-Do a hell of a lot better job with the Itunes interface.

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Anonymous Coward

Very sceptical about this, are there enough iPhones etc in the world to make theis system pay as a stand alone way of doing things.

PayPal works on everything, Apple won't, or will it.

Charge the buyer to make a purchase

Charge the seller to sell the item

Take a cut on the total

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Silver badge

After

The Lloyd's Bank fiasco this weekend I will always remember to carry enough cash to make the purchase.

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Anonymous Coward

work with carriers to make it easy to lock down a stolen phone.

I was under the impression apple already provides a service to lock-down/wipe a stolen iphone (though it doesn't appear to involve the carriers at all).

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Anonymous Coward

They need to:

If they need to do one thing it's stop it being a haven for scammer and theives.

Paypal always side with a buyer in a dispute, it's far too easy for scumbags to rip people off.

If Apple provide a fairer system less open to abuse people will be all over it.

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Thumb Down

That's all we need...

Just like PayPal... another middleman trying to take a cut from someone else's profits.

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Anonymous Coward

Re: That's all we need...

30% cut, no doubt.

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Re: That's all we need...

Not just PayPal, I think they also have Square squarely in their sights as well.

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Bronze badge

The US to leave the dark ages of NO chip and pin

Obviously they have agreement to finally move the US forward into thew 21st century, encompassing NFC.

The backward cartels have no doubt said YES

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Anonymous Coward

Hey, they're an American corperation

So you know right off, they can be trusted.

o_O

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NFC ...

... No Fuckin' Chance.

Doubly so if Apple are involved (in which case it'd be like eBay+PayPal ie. No Fuckin' Choice)

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Silver badge

What if they take NO cut of the payment?

Merchants would be falling all over themselves to get set up for Apple payments if Apple takes no cut, because they could save the 1.5 - 4.5% that current payment processors take.

So what's the incentive for consumers to use this solution? What if Apple required merchants to apply an automatic 1% discount to the sales price for people using their payment system? The merchants no longer have "free", but still save money over the cut other payment processors take. That will give further incentive for merchants to implement the solution, because they'd risk losing customers to other places who have the discount. It is similar to the cash back deals on credit cards, but the discount is applied immediately. The discount could be variable depending on where you shop, similar to how you get a bigger cash back when buying gas (because those merchants pay 5% or more to payment processors, due to all the credit card fraud that occurs at gas stations)

Why would Apple take no cut? Because they make 90% of their profits through hardware sales, so if they make merchants want to support it, and consumers want to use it, they can make iPhones more popular. It would only take a 1% increase in iPhone sales to pay for this many times over.

Apple is pretty consistent that they choose increases in hardware sales over making money on software/services, so this strategy would fit in with that. People like to whine about the 30% cut Apple takes from the app store (which Google chose to match, rather than undercut) but they don't realize that developers used to give up much more than 30% when they sold software in stores.

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Silver badge

Re: What if they take NO cut of the payment?

"Because they make 90% of their profits through hardware sales..."

Tim Cook said it himself a year ago - "Apple is not a hardware company". I don't understand why there are still people who continue to claim that it is. Apple's YoY increase is greatest for the iTunes/software/services category at 19% compared to iPhones 6% and iPads 7%. There isn't much room left to grow the hardware market but software, services, ebooks, etc. are where the future is going. Just consider the profit, how much of Apple's 30% cut on sales is profit? If you guessed damn near all of it, you're right. For every dollar of sales through their app store/iTunes Apple gets 30 cents and even if only 25 cents is profit that's an 80+% margin. You don't get those kinds of margins on hardware.

The whole bonk-pay thing isn't about hardware it's about expanding the services portion. Does anyone really believe that as smartphone and tablet markets approach saturation that Apple is so stupid as to only focus on ways to leverage tiny new things to increase hardware sales instead of leveraging their massive installed base to leverage other products and services?

Come on, they started with Macs and leveraged that to via iTunes to build the iPod which were all leveraged to build up the iPhone and iPad which they will leverage to build up iTunes as they have done all along. Make no mistake the platform is iTunes/app store and if the next great thing winds up burning down the house of iPhone don't think Apple won't be ready and willing to douse it with kerosene and strike the match. In the long haul I expect Apple to compete most directly with Amazon because both companies are working toward the same target from opposite directions.

Speaking of Amazon, I expect they will integrate something similar into the Kindle line that works through their Whispernet.

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Re: What if they take NO cut of the payment?

19% growth of 2% of their profit is nothing compared to 6% or 7% growth of over 80% of their profit.

The problem with trying to replace current payment systems is that everyone wants a cut. Merchants (in the form of paying less, or better yet, nothing) payment processor, credit card companies, and banks. If phones are used, then carriers, hardware OEMs and software OEMs (i.e. Google/Apple/Microsoft) also want in on the game.

Everyone wanting a piece of the pie and those who are currently getting it not wanting to give it up have resulted in the stalemate we have now. The stalemate is only broken if someone finds a way to take the whole pie for themselves or take away the pie entirely so there's nothing left to fight over. Would Apple like to take the whole pie? Sure, every company involved would. The problem is, you have to make consumers want it and have to make merchants want it, which are incompatible with taking the whole pie for yourself.

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Re: even if only 25 cents is profit that's an 80+% margin.

If you think that's impressive, wait until you see their numbers once they manage to become full fledged money handlers like Visa and Mastercard.

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Re: What if they take NO cut of the payment?

"19% growth of 2% of their profit is nothing compared to 6% or 7% growth of over 80% of their profit."

You are aware how painfully obvious it is that you are making things up, aren't you? If you want to be taken seriously look at the actual numbers. First, you have no idea what the profit ratios are because Apple doesn't break that out, they only break out revenue. Second, looking at revenue growth, the iTunes/software/services segment is roughly an equal partner. Lastly the revenue on each hardware item sold is decreasing so Apple needs to sell more items for the same revenue, fortunately this isn't a problem just yet.

iTunes/software/services segment growth of 19% represents 23% of Apples total growth and that includes the software they give away like iWork and the latest OS X. That compares quite nicely with the iPad which is accounted for 26% of Apple's growth. Similarly, combining* the numbers for the iPod and iPhone you will see that the revenue growth is 22% of the total and Macs doing well at 28%; the other 1% being accessories.

YoY, the price of the average iPhone for the quarter is .7% lower, iPads are 2% lower, Macs are almost 3% lower and iPods are down nearly 5%. Granted, overall the average price of the hardware is up 5.3% as people choose the iPhone over the iPod. That may sound good but the iPod well is running dry so the iPhone will have to find it's next meal elsewhere and it's pretty clear Apple are hoping it's Chinese. Oh, I'll also mention that total hardware units shipped is down a half percent as the iPod meanders its way to becoming a footnote in another category.

*I've combined the iPhone and iPod because the iPod has clearly been cannibalized and shows a contraction with people mostly opting for the iPhone.

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Bronze badge

What's in you wall...

Umm, Finger?

One way to pre-empt Apple, or any new start-ups in this field would be some sort of biometric readeer of fingerprints, with two-factor auth, such a a password. Even if someone steals/observes the passwor, there'd be a need for the. Three-factor auth might call for an eyeball scan, and maybe a spit test.

But, if Apple really is serious about entering this market, AND is reticent to be everywhere and yet be botique, then it will probably align itself in some special "strategic partnerships" with Tiffinay-level (is that high enough?) stores. But, that would re-lock out minorities who in general, at first, could not even afford an iPhone (recall back to June 2007).

So, while I don't expect the AppleBonk or iBonk whatever it will be called (there abound "ibonk" handles/accounts from twitter, to fb, to photo sites, and elsewhere, so, if Apple will be calling it iBonk, then a few people are either going to be well-paid off to give up their handles, or they will bet time-machine-retroactive cease-and-desist-be-unborn/undone/unwound letters), the "iBonk/whatever" will probably pop up in Macy*s, Starbucks, certain shopping malls' kiosks, movie theaters, and other places where Apple can influence music purchases.

Maybe even Apple will read the phone states and correlate with the users' iTunes music prefs, run an algorithm, and make the pre-movie experience play up music skewed to drive up moods and music downloads before a movie starts, or to steer mall shoppers to buy music blasting from a physical store. Only thing is, is the phy store might not make a sale, but the iBonkMusicMachine will probably boost iTunes sales.

Probably there is already an iBonk patent being examined, and no reference at all to the youtube, twitter, facebook, and other photo-related profiles....

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Anonymous Coward

Re: What's in you wall...

...minorities who in general, at first, could not even afford an iPhone...

believe it or not, individuals who belong to one or another category of minority are not necessarily without means...

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Anonymous Coward

Re: AppleBonk or iBonk whatever

She Bonk--he Bonk--a--we Bonk

I Bonk--you Bonk--a--they Bonk

Be Bonk--be Bonk--a--lu--she Bonk,

I hope He will understand

She Bonk--he Bonk--a--we Bonk

I Bonk--you Bonk--a--they Bonk

Be Bonk--be Bonk--a--lu--she Bonk,

Oo--oo--she--do--she Bonk--she Bonk

/w apologies to Cyndi Lauper

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Bronze badge

Apple payment system? Bring it!! It has to be better than the craptastic Paypal. I hope it succeeds wildly and buries PayPal.

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google wallet

isn't this basically what google wallet does? or would it go further?

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Re: google wallet

Seems a lot like it. What's the betting that eBay will refuse to allow Apple's service as a payment option, just like it blocks Google's?

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Anonymous Coward

This should send iFans reeling

Just wait until their bank accts. are cleaned out and Apple says "sorry", not our problem.

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Bronze badge
FAIL

iFail

Telling people they need iTunes integration to spend money is nothing but stupid. iTunes is a bloated dumping ground for features that were never properly integrated elsewhere. It hangs, it crashes, most of its UI stopped making sense years ago, and playing music has become a minor feature. It has grown into a clumsy secondary operating system for iPhones, Apple TV, music, movies, books, "the cloud", storefronts, contacts, parental controls, remote devices, etc., etc. Micropayment integration with the iTunes system will probably be the point where Apple's remaining customers say, "I give up. Bye." If history repeats itself again, Apple will be nearly dead before they stop being so stubborn.

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FAIL

War? Drama headline much?

As a long time PayPal user who always buys stuff from Apple via PayPal, I cannot fathom what myth you're attempting to foist today. There is no 'war' with PayPal. If, however, Apple eventually decides to compete with PayPal (which they are NOT at this time) then good on them! Competition is the father of innovation.

Meanwhile: What's with the drama infliction on your readers? Going tabloid?

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Tel
Big Brother

If it goes ahead, they're going to have to find a better name than 'iTunes' for the One App To Rule Them All.

It's already anachronistic seeing as it's more than just 'tunes' now...

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Joke

> they're going to have to find a better name than 'iTunes'

They have it, named after the destination for all payments through the system, iCahn.

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Silver badge

You'd think that after Target and Nieman Marcus

the head honchos would start re-thinking these sorts of grandiose plans to use the One Ring to bind it all together.

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