What happened
Shares of Apple (AAPL 0.43%) initially climbed higher on Thursday, adding as much as 2.6%. However, as of 1:55 p.m. ET, the overall market headwinds had dragged the stock into the red, down 0.3%.
The catalyst that initially sent shares higher were reports that Apple plans to turn its iPhones into payment terminals, thereby challenging Block's Square.
So what
Rumors emerged late Wednesday that Apple has plans to introduce a new service that will allow small businesses to process payments on their iPhones without requiring additional hardware, according to a story that first appeared in Bloomberg. The technology would allow merchants to accept payments via the iPhone with the tap of a credit card or another iPhone, eliminating the need for a dedicated card reader.
Image source: Getty Images.
The report, which cited "people with knowledge of the matter," suggests that Apple is building out technology it acquired via its $100 million acquisition of Mobeewave in 2020, which allowed smartphones to accept payments without requiring additional hardware. The technology would likely use the iPhone's integrated near field communications (NFC) chip to power the feature, which is currently used to process Apple Pay transactions.
This would mark a change from the company's existing tech for receiving payments, which requires the use of a payment terminal connected via Bluetooth or directly to the device in order to read the credit card.
Now what
Apple has made a concerted push into the payments and fintech market in recent years, with the debut of the Apple Card in 2019. Customers are offered attractive installment plans when purchasing Apple devices using the card.
The Apple Cash Card has a peer-to-peer payments service that lets users send funds to friends and family, competing with PayPal's Venmo. Additionally, reports suggest the company is working on a plan to offer "buy now, pay later" services via Apple Pay, which would rival Affirm Holdings.
If reports of Apple's plans are true, it would also put the company on a collision course with Block, which revolutionized small business with the introduction of its Square card reader. The device can be plugged into any smartphone, thereby turning it into a payment terminal, an area in which Block dominates.
