Apple rivals Square by turning iPhones into payment terminals

NEW YORK (BLOOMBERG, REUTERS) – Apple is planning a new service that will allow small businesses to accept payments directly on their iPhones without additional hardware, according to people with knowledge of the matter.

The company has been working on the new feature since around 2020, when it paid around US$100 million (S$135 million) for a Canadian startup called Mobeewave which developed technology to enable smartphones to accept payments at the touch of a credit card.

The system will likely use the iPhone’s Near Field Communication chip, or NFC, which is currently used for Apple Pay.

To accept payments on an iPhone today, merchants must use payment terminals that plug into or communicate with the phone via Bluetooth. The upcoming feature will instead turn the iPhone into a payment terminal, allowing users such as food trucks and hairdressers to accept payments by simply tapping a credit card or another iPhone on the back of their device. .

The move could impact payment providers that rely on Apple iPhones to facilitate sales, like Block’s Square, which dominates the market.

If Apple allows an app to use the new technology, Square can continue to accept payments through Apple devices without having to worry about providing its own hardware. If Apple forces merchants to use Apple Pay or its own payment processing system, it could directly compete with Square.

A representative for Block did not immediately respond to a request for comment.

“It effectively allows Apple to bypass the rollout of new hardware because a significant number of customers are already carrying it (iPhones) in their pockets,” said Edward Jones analyst Logan Purk.

Purk added, however, that unless Apple can deliver a cheaper product and a simpler platform, some business owners may be reluctant to switch.

Square currently charges US$299 for its device and a fee of 2.6% plus 10 cents US for each transaction.

Shares of Block fell 3.4% at the market open in New York on Thursday (January 27); Apple advanced 2.1%.

It’s unclear if the payment acceptance option will be part of Apple Pay, although the team working on the feature has been working within Apple’s payments division since it was transferred from Apple Pay. Mobeewave, the people said. It’s also unclear whether Apple intends to partner with an existing payment network for the feature or launch it on its own.

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