There are already plenty of reasons why Apple's (NASDAQ:AAPL) new Apple Pay service, set to launch today, looks poised to succeed where all others before it have failed. Apple Pay's economics, security, and experience all appear far more promising than what's currently available in the market.
But there's one more thing.
Less regulatory burden
According to The Wall Street Journal, Apple will face significantly less regulatory burden than rivals like eBay's PayPal or Google Wallet. Apple won't need to set up anti-money laundering compliance programs, which are costly and time-consuming. Such programs are required for companies that offer financial services where money is being stored.
Since Apple Pay is not storing funds, and instead only transmitting tokenized payment information, it's only considered a "payment enabler" and is free from these regulatory requirements. Thanks to its broad range of partnerships with all of the major financial institutions, including banks and payment networks, these partners operate the underlying payment infrastructure while Apple only facilitates payments. Apple is not directly involved in the movement of funds, which is where the regulatory oversight typically comes into play.
Leave P2P to the other companies
In contrast, services like Google Wallet and PayPal do store funds and allow users to pay with their existing balances. PayPal accounts have always been like extensions of bank accounts, where users can keep funds for later use with online purchases. Google Wallet similarly stores value, which can be used online or sent to friends and family.
In fact, most of the recent payment services function this way, including Amazon.com Payments, in part to enable peer-to-peer, or P2P, payments. A wide range of start-ups is attempting to tackle P2P payments, including Venmo (whose parent company Braintree has since been acquired by eBay) and Square.
The P2P payments market continues to evolve as people seek more modern ways to transmit funds between friends and family (paper checks are just a wee bit antiquated in 2014), and P2P transactions volume could hit an estimated $86 billion in the U.S. alone by 2018. But Apple's not trying to address the P2P market, despite its size. Instead, Apple wants to improve the payment process for purchases, which is a much larger market at $12 billion in transactions in the U.S. daily.
Since the P2P market is an easier nut to crack and there are plenty of offerings, Apple has less to bring to the table here. Ignoring P2P and pursuing the broader payments market with less regulatory burden is yet another way Apple is maximizing its odds of success.