A new feature in Apple's payments technology could present formidable competition to bank-run Zelle and other near-instant P2P payment options.
The update to
Apple's making its move as P2P technology expands across financial services. A few weeks before Apple announced the tap P2P feature, Visa, for example, revealed a similar feature to build on its existing
In the case of Apple, tap P2P users will each have to have an iPhone, which at least in the U.S. carries a high likelihood. Apple and Samsung dominated the top 10 list in this year's first quarter, capturing 22% of the total U.S. smartphone market, according to
Payment experts don't expect the new features to unseat popular payment methods like Zelle, Venmo and PayPal. But the new options are poised to steal market share, which means banks should pay close attention. In 2023, about 120 million consumers and small businesses sent 2.9 billion transactions totaling $806 billion via Zelle—up 28 percent from the prior year, according to a
Many consumers and businesses use services like Zelle, Venmo and PayPal for transactions that don't require users to be in the same room. These include group birthday gifts, office party collections and paying businesses for services previously rendered. These types of remote payments are likely to continue, industry consultants said.
"It may cut into some market share, but there's no way Zelle and Venmo go away. I think it just adds to the ever-growing marketplace of instant payments," said Daniela Hawkins, partner at Capco, a London-based business and technology management consultancy.
The new features also don't undermine the economics of cards, said Aaron McPherson, principal at Boston-based AFM Consulting. "There are other things that banks are more worried about, like threats to the interchange model," he said.
Even so, Apple's prowess at winning over new customers and its loyal customer base could mean that a portion of funds previously directed through Zelle and others could go through Apple instead. Tap P2P features will be most useful for everyday transactions where users are in close proximity, such as people dining together at a restaurant or cafe, or when paying on the spot for plumbing services or an air conditioning repairman, or for purchases made at a garage sale.
"To the extent that this feature is useful because consumers find it compelling, it makes it more likely that consumers would make Apple Pay their dashboard for financial services—to do more over Apple Pay—which is bad for banks broadly," said Eric Grover, principal at Minden, Nevada-based Intrepid Ventures, which provides corporate development and strategy consulting to financial services, payment network and processing businesses. "Apple is not a friend of banks," he said.
Visa's offering, meanwhile, could be even more compelling for some users, Grover said, because of the scope of its network. On the other hand, Visa has struggled to generate momentum for new products in the past, he added.
For small businesses, the new Apple P2P feature could be especially important, Hawkins said, adding it's a convenient way for consumers to pay at places like farmers markets, pop-up markets or garage sales, where users may be hesitant to share their contact details. "It's going to be consumer to small business where we are going to see the biggest adoption," Hawkins said. This represents added competition for Block's Cash App and Zelle.
"Small businesses have been screaming from the top of their lungs for a long time that they don't want to pay the interchange fees to accept Visa or Mastercard," Hawkins said. The ability to accept payments through Apple is likely to be compelling. Plus, if users make a mistake with payment options like Zelle, Venmo and PayPal, they are out of luck. With tap to pay, there's less chance for mistakes, given the face-to-face requirement. This, too, could spur consumer and business adoption, Hawkins said.
The new features will likely appeal to younger users or older users that are more tech-savvy. There's been a big increase in adoption of mobile wallets and tap to pay broadly, but it's still a hump many consumers, especially older ones, haven't gotten over, Hawkins said. "Changing old habits is hard to do, if you've spent 70 years getting your wallet out."
