Apple (NASDAQ:AAPL) has reportedly acquired a Canadian start-up with technology that could be used to turn every iPhone into a contactless payment acceptance device, directly challenging Square (NYSE:SQ), which is the leading provider of mobile payment hardware and software.

Bloomberg says Apple is paying $100 million to buy Mobeewave, a maker of tech that allows mobile devices to accept in-person payments without additional hardware.

Hand tapping card against smartphone

Image source: Mobeewave.

Tap and go

Once the Mobeewave app is installed on a smartphone equipped with a near-field communication (NFC) chip, a buyer can simply tap their credit card against the back of the phone to make a payment without the need for any dongles, wires, card readers, or other hardware.Buyers can also type in an amount they want to pay on their own phone and tap the recipient's phone to make the payment.

Samsung partnered with Mobeewave to allow its smartphones to use the technology, and last year, its venture capital arm, Samsung Venture Investment, invested in the company. That followed a round of funding led by NewAlpha, Mastercard, and Forestay Capital.

Apple's iPhones have come equipped with NFC chips since 2014, meaning this acquisition could undermine Square's position in the market, given that it depends upon card readers to complete transactions. With Mobeewave, the tech giant's popular smartphones would become payment terminals too -- no dongle needed.

Although contactless payment systems aren't new, the coronavirus pandemic has likely increased interest in them, as customers and retailers look for ways to limit physical contact, even with a card reader.