Apple’s announcement of its upcoming launch of P-to-P capabilities was no surprise. But the details should come as a shock to many of the banks that have bent over backwards to support Apple Pay on Apple's strict terms.
The P-to-P function can draw funds from Apple Pay, but it doesn't require that the recipient be enrolled in Apple's mobile wallet. The funds can instead go onto a virtual Apple Pay Cash card
(a prepaid account from Green Dot), a structure that may have significant implications for issuers both domestically and internationally if Apple chooses to expand the capability.
While Apple Pay is the most commonly used mobile wallet at the point of sale, it's little to brag about. Recent research
from First Annapolis highlights that just 8% of iPhone owners are regular (once per week or more) users of Apple Pay in store, so clearly its practice of working only with banks has its limits.
The Apple Pay Cash card is purely virtual, according to a source from Apple, and thus it cuts out the need to enroll with a bank account or even carry a separate wallet.
A P-to-P system tucked within iMessage may seem like little threat to banks, but there is precedent for P-to-P as a gateway drug to retail transactions. AliPay and WeChat wallets have exploded, reaching US$2.9 trillion in 2016
. Both of these payment networks evolved from messaging platforms.
"The real challenge will be getting consumers to use the P-to-P service," said Michael Moeser, director of payments at Javelin. "When Apple Pay first came out it had very little competition, despite Google’s efforts. In contrast, Apple’s new P-to-P service will compete head-on with Venmo, Zelle, Square and others. Giving the enhanced functionality of a virtual debit card may not be enough to fuel widespread adoption."
The success or failure of Apple’s P-to-P effort may be the deciding factor in determining whether Apple's devotees want to keep their money in an account tied only to their iPhones.