Recently, Apple (NASDAQ: AAPL) sent ripples through the investing community with a mere job listing. Apple is looking for a Payments Software Engineer that will "help build a next generation payment platform." While a simple job posting seems somewhat pedestrian and rather innocuous, Apple investors know the inherent potential of this technology. Could a payment platform provide Apple the top-line growth its investors are accustomed to?
Apple's calculated approach
Many that follow Apple understand that this company is methodic in the way they enter a new market. Rarely will they enter a new market unless they have a totally integrated approach. If Apple doesn't have the hardware, software, and operating system to accommodate the opportunity – they simply don't enter that market until they do. While this is frequently a source of consternation amount "first-mover junkies," it gives each new product the maximum chance for success. Apple's been faulted for being late with the smart watch, a TV unit, and a phablet. However, Apple has held firm to its belief and it is paid off – Apple is the largest publically traded company in the world.
Why a payment platform, and why now?
Fresh off of Apple's iBeacon partnership with Macy's and Shopkick this holiday season , Apple is slowly establishing the framework for this payment platform. The hardware appears to be iPhones; the software/app appears to be a bluetooth enabled Shopkick app supported by the iOS 7 operating system. In addition, the iPhone 5s has the fingerprint sensor technology to provide a higher level of security than password protected payment systems.
How big is the opportunity?
In a word: huge. A recent Forrester report anticipates the US mobile payment market will have US$90 billion spent in 2017, leaping from 12.8 billion in 2012. So, that's nearly a 50% CAGR — outstanding growth. Right now, there are many competitors, including well-financed Google (NASDAQ: GOOG) Wallet and eBay's (NASDAQ: EBAY) PayPal unit. However, nobody has established the reference standard with mobile payments and each of these competitors have their flaws.
Although Google Wallet was announced to much fanfare, the rollout has been lacklustre at best. The company relies on NFC technology by partnering with Mastercard's PayPass and Visa's payWave, requiring many merchants to upgrade their terminals. Google recently announced a physical Google Wallet card last month with many arriving now. In keeping with the spirit of disappointment, the card (hardly what one would consider revolutionary) doesn't work outside of the US and is a much scaled down idea from earlier leaks of a universal payment card.
eBay's PayPal is a large growth driver for the company and has the added advantage of brand recognition and trust. A recent comScore survey pegged PayPal as the most-trusted digital wallet with 72% percent of respondents aware of the product and 48% having used the product. However, eBay will have to contend with both Apple and Google on their own turf, they have no operating system or handsets to seamlessly pair with. In addition, since nearly 90% of all phones have either iOS or Android operating systems, eBay may find themselves crowded out of the mobile market by revenue-hungry operating system providers.
Apple's opportunity
Apple doesn't invent products, Apple reinvents products. This creative destruction allows it to redefine product categories. If you aren't familiar with Apple's disruptive potential, look around for a local record store or find a colleague with a BlackBerry. Apple is deliberate in its approach to new products. And as far as "first-mover junkies" are concerned, it is important not to confuse motion with progress. Apple is deliberate, but long-term investors will be rewarded for their patience.
