Apple's new payment system hopes to change the way people make purchases both in stores and in apps, and that could become a big problem for the Web's biggest digital payment network, PayPal.
In addition to allowing people to pay in stores, Apple Pay will also let owners of the newest iPhones buy things within participating apps by using the credit or debit card they have on file with iTunes or the App Store.
This means they don't have to go through the annoying process of typing in payment information on small screens. Here are a few main reasons why the success of this product could damage PayPal in the long run:
1. Apple published an initial list of six "highly recommended" payments partners, including Stripe and First Data, that can process Apple Pay purchases for app publishers. Guess who's not on the list? Braintree, which happens to be PayPal's new payments processing unit for mobile apps.
Braintree later announced it'll help apps that run on its platform integrate with Apple Pay. How would that work? Basically, an app merchant using Braintree for payments could use it to process Apple Pay. That could mean a consumer could see both an Apple Pay button and a PayPal button when he or she wants to buy something. In either case, PayPal (via Braintree) will get paid something, but typically won't earn as much profit if the consumer clicks the Apple Pay button.
2. PayPal's Braintree owns Venmo, a consumer app that allows people to send money to each other. Consumers who have Venmo or PayPal's app can use PayPal's "one-touch" payments system to pay within an app. But that means signing up for Venmo or PayPal and downloading one of the apps. Compare that to Apple Pay, which doesn't require new sign-ups or downloads.
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In an interview with Re/code, Braintree CEO Bill Ready made the case that people sign up for PayPal and Venmo for other reasons, such as to make purchases on eBay or send money to friends, not just to make one-touch payments. He also made the case that the one-touch button works on other mobile operating systems, such as Android.