What’s Apple’s payments strategy?

In the coming months, Apple will let iPhones process credit card payments without additional hardware. By turning its smartphones into POS systems, Apple is placing itself in direct competition with platforms like Square.

Why should we care?
Apple’s payments pivot will test the infallibility of network-effect theories. Apple Pay’s launch, which saw the computing giant join the payments race relatively late and only take 1.7% of the market, suggests that payments success hinges on timing. Square currently dominates the POS space; with iPhones outnumbering Square’s suite of readers, however, Apple may hope to gradually eat away at Square’s corner of the market through sheer convenience. Businesses won’t have to order new or updated devices the way they do Square products, because iPhones already make up nearly half of all smartphones in North America. While this move’s ultimate success does hinge upon the tradeoff between timeliness and convenience, it’s also contingent upon the U.S. government’s reaction to it in terms of antitrust concerns. Will regulators greenlight Apple’s market dominance across so many fronts? Apple will anxiously await a state response—as will Alphabet (Google), which might hope to copy the payments strategy through its Android smartphones.