Is a Payment Service From Apple, Inc. Imminent?

Apple (NASDAQ: AAPL  ) CEO Tim Cook and other Apple executives have boasted on numerous occasions of a robust pipeline of new products. Cook has even said it has products coming that are in entirely new categories. But what often goes under the radar is that Apple has explicitly said it is also planning new services.

Consider this excerpt from the prepared remarks in Apple's third-quarter earnings call last week.

We are hard at work and investing heavily on exciting opportunities across our business and we have an incredible pipeline of new products and services that we can't wait to show you. [emphasis added]

While there is a large spectrum of potential services Apple could be working on, a payments service is the most likely. And recent reports support this speculation.

iTunes Pass. Image source: Apple. Motley Fool senior technology specialist Evan Niu suggests that iTunes pass, although only offering minor incremental convenience today, may offer clues about Apple's longer-term payment strategy.

Tim Cook talks payments
Beyond talking about new potential services for Apple in general, Cook has specifically given a meaningful nod to payments.

One of the most recent times he acknowledged the potential for Apple to enter the payments space was in Apple's first-quarter 2014 earnings call. He said the "mobile payments area" is one that Apple has been "intrigued with." Going further, Cook said a payments service was "one of the thoughts behind Touch ID."

"So I don't have anything specific to announce today," Cook continued during the call, "but you can tell by looking at the demographics of our customers and the amount of commerce that goes through iOS devices versus the competition that it's a big opportunity on the platform."

Touch ID demonstration on iPhone 5s. Apple's Touch ID is likely to be a foundational building block for Apple's payment service. Image source: Apple.

When Cook referred to the "demographics of our customers," he may have been referring to studies like the one from IBM last year that showed e-commerce sales were far higher for iOS shoppers than they were for Android.

"People who buy iPhones are slightly more affluent, and more likely to be teach savvy," said Jay Henderson, IBM's strategy director for smarter commerce. This difference in demographic shows up in spending data. IBM's study of online shopping on Black Friday in 2013 showed that despite the smaller market share for iOS compared with Android, Apple's platform made up about 18.1% of online sales, compared with just 3.5% for Android devices.

The latest speculation pointing to a payments service from Apple
Despite four years of claims that Apple would launch a payment service using near-field communication, or NFC, the reports that NFC will be utilized in Apple's next-generation iPhone are just as prominent this year. The latest mention of the technology's potential in the iPhone 6 comes from Nowhereelse.fr, which asserts that the technology will be built in to the iPhone 6, along with faster 802.11ac Wi-Fi. However, calling NFC "an old technology far inferior to Bluetooth Low Energy," 9to5Mac's Mark Gurman suggests that we shouldn't "count on it happening."

Image source: Apple.

But as the rumor mill debates about what technology will be used, a report from The Information last week says that Apple is, indeed, likely to launch a "mobile wallet" alongside the iPhone 6, citing people briefed on the talks about the service. Apple is in talks with banking institutions and credit card associations, including Visa, The Information asserts. The Information also contradicts reports that NFC technology will be used, saying it may focus on Bluetooth or even Wi-Fi instead.

Given the scale of Apple's user base, with over 800 million credit card-linked iTunes accounts, combined with the high-end demographic of iPhone users, a payment service could turn out to be a lucrative service for Apple.

Is the service finally imminent? It's certainly looking more likely than ever before.

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