The headlines on this are a little misleading, as are the comparisons with Square. What Apple has announced is purely a hardware solution: the capability for the iPhone to function as a card terminal for payments. In contrast, Square is also a Payfac, so when you sign up with Square you get both a merchant account and a card acceptance technology. Apple has no plans (or at least it hasn’t announced any yet) to become a Payfac and offer merchant accounts to iPhone users. While the hardware solution would seem to be a good fit for a micro-merchant, the merchant still needs to source a merchant account from a bank or acquiring processor. The reason that Square become so successful is that its Payfac model equipped micro-merchants with a low-cost sub-merchant account that didn’t carry the monthly fees and minimums that most merchant accounts have. So without a Payfac solution, I don’t see the iPhone being of much use to a micro-merchant on its own.
We do see this working well in an omni-channel environment. Most big box merchants equip their employees with mobile devices that run a suite of apps that let employees locate products on shelves and determine inventory levels. Adding payment capabilities right to the device without needing extra hardware enables payments to be accepted outside at tent sales, at curbside, and anywhere in the store where there is a need
There has been no mention of pricing, because what are they selling? There are no processing services, only the ability for the iPhone to act as a terminal, and pricing for the iPhone is already well established. The iPhone can read the card credentials using NFC, but the only thing it can do is pass the data to another app. Stripe and Shopify were two to come out in front and say that they were building iOS apps to use this card reading capability, enabling their merchants to add in-person card acceptance to their existing e-commerce merchant accounts. This product offering also enables Stripe and Shopify to expand their target market beyond e-commerce and effectively compete with Square in the micro-merchant markets if they choose to.
Overview by Don Apgar, Director, Merchant Services Advisory Practice at Mercator Advisory Group
