A lengthy and rather meandering article appeared in the Washington Post today that is predicting the end of banks and payment networks at the hands of Apple Pay. The article jumps to the immediate conclusion that Apple will soon disregard its bank and network relationships that were necessary to bring Apple Pay to market and will create its own currency through blockchain technology:
Once Apple has established its platform, it won’t need the banks and credit cards any more. It will be able take advantage of another new technology, the blockchain, to offer an alternative payment option. Blockchain is the core technology behind Bitcoin, and functions as a transparent ledger of transactions, concurrently hosted on numerous computers around the world — allowing the creation of digital currencies and virtual banks.
What the author believes will allow Apple to successfully achieve market domination is its loyal customer base, the opportunity to process transactions at a lower cost than the networks since Apple does not need to make money on transactions, and the ability to provide incentives to its customer base. The article assumes building an acceptance network is a foregone conclusion the will only require Apple time:
Financially, too, Apple also has many levers that it can push. It could offer credits on purchases of an iPhone and at the iTunes store, as well as exclusive discounts. The rebates for credit card fees could be used to buy music on iTunes, movies on Apple TV, or iPhone accessories. True, there are presently very few outlets that accept Apple Pay; but once it gains momentum, practically every retailer will find it necessary to install an Apple Pay terminal or an add-on to their iPhones that will act as one.
Overview by Sarah Grotta, Director, Debit Advisory Service at Mercator Advisory Group
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