"Together, Apple and PayPal would revolutionize the mPayment market"

Munich, February 17, 2014. The electronic wallet has not yet achieved universal acceptance. However, according to a study by goetzpartners, some 21 million smartphone owners are interested in mobile payment. A joint solution provided by Apple and PayPal would have the chance to set an mPayment standard.

mPayment, making payments on the go via a cell phone, has not yet achieved universal acceptance. Whereas half of all smartphone owners shop online with their cell phone several times a year, so far only one in five has paid for an in-store purchase with a smartphone. This is the finding of the recent study, “Will the mobile wallet help mPayment achieve breakthrough? Success strategies for market players based on current consumer needs”, conducted by management consultancy goetzpartners and ECC Köln. The reason for this consumer reticence lies in the limited acceptance of mPayment or mWallet solutions in over-the-counter retail today. The goetzpartners study found that this is a complaint expressed by 63 percent of potential users. There is certainly sufficient demand for mobile payment, with around 21 million potential customers: 56 percent of the smartphone owners who participated in the study are interested in making payments with their cell phone.

No standard has yet established itself. Many different providers from the technology, financial services, telecommunications and retail sectors offer solutions with various strengths and weaknesses. The goetzpartners study provides a precise analysis.

However, the outcome of the race could be decided quickly if rumors circulating on re/code are substantiated, and Apple and PayPal really do work together on mPayment. As Marcus Worbs, Partner at consultancy goetzpartners, explains: “Apple and Paypal are the perfect complement to one another and together they could revolutionize the mPayment market. With the iphone 5s, Apple offers the right hardware, complete with fingerprint sensor, and boasts more than 500 million iTunes customers, while, in addition to some 123 million users, PayPal provides expertise in payment handling and a high trust rating.”

The complementary competencies of Apple and PayPal make up for their individual shortcomings

Like others, PayPal and Apple are each operating in the mobile market with their own, very different solutions and a moderate level of success. Combining the two companies’ skills portfolios would make a lot of sense in our view, given that they complement each other extremely well. Whereas PayPal has to date concentrated exclusively on payment transactions, Apple currently offers a Passbook function without a payment option. Together, they could offer an attractive mWallet product that would meet with greater demand from customers than the two individual offerings separately. Furthermore, Apple’s broad customer base consisting of tech-savvy early adaptors could be helpful in expediting the breakthrough of mobile payment channels among consumers.

The cooperation could largely eliminate what has been one of the key shortcomings of mobile solutions to date. Currently, the extent to which they are usable in different channels, particularly at the brick-and-mortar POS, is limited. The combination of PayPal’s extensive payment infrastructure – already tried and tested in the online market – and Apple’s existing retail structure, its direct access to customers and its innovative devices would enable the realization of a wide-ranging offering.

Moreover, PayPal makes up for the lack of credibility that comes with technology concerns like Apple in respect of data protection and security in payment transactions. Whereas not even 24% of German consumers deem technology companies trustworthy, PayPal constitutes an exception as not only the most widespread payment option (46%), but also by far the most trustworthy solution, considered credible by 72%.

As a final point, there is the fact that the two companies are already familiar with each other given that PayPal was brought in to the iTunes Store as an additional payment method besides credit cards in May 2013. This is something the envisaged cooperation could build upon.

BLE could win through against NFC as the lead technology for mobile payments

Months ago, there were already signs that Apple and PayPal were going to turn their backs on the NFC and QR standards, which have not been particularly successful. The iPhone 5s was once again not equipped with near field communication (NFC) technology. The two companies are launching PayPal Beacon and Apple iBeacon, respectively, both Bluetooth low energy (BLE) based technologies, which can be used inside buildings to exchange data or commands with smartphones. In view of the fact that BLE provides a way of personalizing the shopping experience to an even greater degree (for instance via automated checkout), requires significantly lower investments at the physical POS than, for example, fitting out with NFC, and could also be used with older mobile devices that have a Bluetooth interface, it is likely to achieve greater penetration than technologies to date. So if PayPal and Apple were to exploit their strengths and create a user-friendly and secure solution on a BLE basis, this could establish the lead technology that the market has so far lacked.

Outlook

“In my view, a partnership between Apple and PayPal would make a lot of sense and could quickly set standards in mPayment and end up attracting large numbers of customers,” says Worbs. “It’ll be exciting to see whether Apple turns the tables on its conventional approach and does enter into a partnership, or whether it endeavors to conquer the market alone as per usual. I think that’ll be difficult: If the competition, say Google, telecoms companies and the financial sector, were to react and join forces, it could be they who set the standard for mPayment.”