What happened
A disquieting report about a rival's possible encroachment on its core business socked Block (SQ -1.97%) with a nearly 5% sell-off in its shares on Thursday. Investors were clearly spooked that a powerful new competitor might give the successful fintech a run for its money.
So what
After market hours on Wednesday, Bloomberg published an article stating that ever-mighty Apple (AAPL -0.57%) plans to launch a small-business payments service. "People with knowledge of the matter," told the business news agency the service would be made available through iPhones, without requiring additional hardware to function.
Image source: Getty Images.
The article's sources said that Apple, always hungry to find fresh and strong wellsprings of revenue, has been developing such a service since 2020. That year, it spent roughly $100 million to acquire privately held Canadian company Mobeewave, a mobile payments specialist.
The prospect of a service that can turn any iPhone instantly into a payment terminal presents obvious concerns for Block, which built its business on a similar, low-hassle hardware/software combination called Square.
Neither Block nor Apple opted to comment on the Bloomberg report.
Now what
While Block investors are right to be concerned about the potential entry of Apple, at this point it's still just speculation. Meanwhile, the article's sources did not provide information on compatibility -- i.e., whether the notoriously proprietary Apple would be willing to make its payments service available to third-party fintechs with similar solutions...like Block.
Also, over the years Block has done an admirable job building out its ecosystem, stealing a page from Apple's playbook. So its fortunes aren't fully dependent on that core payments solution.
That said, if the Bloomberg report is accurate, Apple does have the potential to disrupt the small-business payments realm. Considering that, its moves in this arena should be watched closely by Block shareholders.
