Time is running out for Apple (Nasdaq: AAPL) to establish iTunes as a default payments platform. Earlier today, Discover Financial Services (NYSE: DFS) and PayPal announced plans to allow customers to use PayPal at merchant locations that accept Discover -- more than 7 million in the U.S. as of this writing.

Color me thrilled. From time to time, I sell excess and unwanted collectibles on eBay (Nasdaq: EBAY) and deposit the cash in a PayPal account. I'd like very much to have those funds available in a debit card for the occasional retail indulgence. Discover might finally grant my wish.

But it's the potential for cross selling that makes this deal interesting for investors. PayPal's 113 million active customers get greater options for using funds, while Discover gets a new way to differentiate its credit and debit products from branded offerings from MasterCard (NYSE: MA) and Visa (NYSE: V).

Apple could also lose out. PayPal is already the world's largest digital wallet. Imagine what happens if the Discover deal is only the first of many agreements that make PayPal funds usable everywhere. We'd be a better smartphone app away from making iTunes unnecessary for anything other than in-app purchases.

I'd hate to see that. Having iTunes grow to become a digital wallet makes too much sense. Just look in your pockets or purse. Chances are you'll always have three things: keys, wallet, and phone. Combining two (phone and wallet) makes sense, but only if users find the experience effortless.

Therein lies Apple's advantage: iTunes is already built into iOS as a default payments platform for in-app purchases. The new Passport app for storing tickets and loyalty-card info also moves Apple closer to having a complete digital wallet.

For its part, PayPal has an iOS app, but it isn't designed to handle in-app, in-store, or any other type of payments. Ironically, Google's Wallet is better than both in some real-world instances, such as buying movie tickets.

Wireless retail payments are coming to the iPhone, Fool; it's just a matter of when and who makes its possible. Tick-tock, Apple.

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