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Can Apple Disrupt the Global Banking Industry?

The company has changed music forever and had a big impact on publishing—and now it's taking aim at a growing segment of the financial sector.
By Mark Roberti
Oct 27, 2014

When you are a giant—especially a giant with a reputation for changing entire industries—your mere footsteps can effect change. On Sept. 9, Apple announced Apple Pay, a Near Field Communication mobile payment solution that takes advantage of fingerprint technology in new iPhones. Within three weeks, eBay announced it would spin off its PayPal unit. PayPal is the leader in online payments and is pushing into mobile payments. But for months, eBay had been rebuffing investor Carl Icahn's demand that it spin off PayPal. PayPal has also begun to talk about embracing NFC for payments.

Square, a startup that provides a peripheral device and application that lets anyone process credit cards on an iPhone, announced it planned to allow merchants to accept Apple Pay transactions. But two major U.S. store chains—Wal-Mart and Best Buy—announced that they would not support Apple Pay. The two are backing CurrentC, an NFC-based mobile payment solution being developed by a network of retail store chains called Merchant Current Exchange (MCX).

Photo: iStockphoto
Apple certainly has a track record of disrupting industries. It transformed the way music is purchased and distributed. Prior to the launch of iTunes and the iPod, most people purchased their music on CD. But CD sales have been falling steadily, and according to Billboard, more people will purchase albums via download than on CD for the first time this year.

Apple has also had an impact on the way books are purchased, though its influence has not been as great as that of Amazon, which first disrupted the publishing industry with online book sales. But is it a given that Apple will transform the way people pay for goods? Hardly. There are numerous hurdles Apple will need to overcome before Apple Pay is widely embraced.

1. Europe and Asia are already embracing mobile payments.
Visa and other credit card companies have been working with Vodafone, Orange, Telefonica and other telecommunications companies to offer mobile payments across Europe. Several of these use NFC solutions, but others do not. In Asia, RFID payment systems are used in mass-transit systems and have spread to convenience stores and other shops. They tend to use older RFID technology that is not compatible with NFC.

2. Retailers want to control their own network.
Retailers proposed the idea of CurrentC (a play on "currency"), because they would like to control their own network and avoid having to pay additional fees. While Apple is not looking to take any cut of transactions made via Apple Pay, retailers might still prefer to use a network they control. This would enable them to ensure the privacy of their customers and the security of the network.

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