New rumors surfaced recently that Apple (NASDAQ:AAPL) might soon throw its hat into the person-to-person (P2P) mobile payment ring. The news isn't entirely a surprise. Apple received a patent for a similar feature over the summer and the growing interest in mobile payments from other tech companies (Facebook and Alphabet's Google come to mind) means that Apple would be unwise if didn't at least look into its own offering.
And while the P2P payment space may getting more crowded, there's one major player that should be at least a little bit concerned that Apple may be about to show up: PayPal (NASDAQ:PYPL).
In PayPal's third quarter, users from the company's Venmo P2P payment service made $2.1 billion of mobile payments, up from $700 million in the year-ago quarter. That's impressive growth, but what's even more important is Venmo's strong position in the P2P payment space.
According to data from Aite Group, Venmo makes up 5% of all P2P payments, and 19% of all mobile P2P payments. That makes the service the second most popular way to make a mobile transaction, behind mobile banking (like bank apps and websites).
P2P payments are expected to hit $174 billion by 2019, with 30% of those coming from mobile devices. And with Paypal's Venmo taking the lead right now, the company clearly has an advantage in the space.
Apple, of course, has no position in the P2P space right now. But that doesn't mean it doesn't already have some key advantages over PayPal.
First, Apple has about 100 million iPhone users in the U.S., and at least one-third of those have Apple Pay-compatibility. That gives Apple a distinct advantage over PayPal because its Apple Pay app is pre-loaded (of course) on millions of iPhones, iPads, and the Apple Watch.
While Venmo may already be a popular service, Apple's strong brand, marketing chops, and ability to integrate a payment service onto millions of devices with a software upgrade could make Apple a strong Venmo competitor very quickly.
And this leads into Apple's second major advantage: it already has a financial relationship with every iPhone user. Through iTunes and the App Store, most of Apple's U.S. customers have handed over their financial information to Apple. For PayPal and other companies, getting users to download an app and then enter in their financial information are two huge hurdles. But for Apple, the relationship has already been established and the bank account information is already there, ready to be used in new ways.
Why PayPal's really in trouble
Launching a new P2P payment system would be a way for Apple to build Apple Pay even stronger, by giving users, retailers, and banks even more of an incentive to adopt the technology.
And that is one of the reasons PayPal should fear Apple's possible P2P entry, not just because it could hurt payments from its Venmo service, but because it shows that Apple is digging deeper into the mobile payments space -- and it likely won't stop until it dominates the industry.