Apple's iOS 11 sparks P-to-P's next disruption

Register now

Apple caused quite the stir at its annual Worldwide Developer Conference this June as the company signaled its intent to move into the social payments space.

With an update to iOS 11 coming out later this fall, Apple will enable iOS users to send and receive money within iMessage through their own Apple Pay service.

With the move, Apple follows fellow Silicon Valley giant Facebook and the legacy banking tie-up Zelle into the consumer payments space. Digital P-to-P payments isn’t a new concept, but there’s a giant market up for grabs, one that the analyst firm Aite Group estimates to be a $1.2 trillion in the U.S. alone.
Apple’s WWDC announcement and the Zelle rollout add to a growing field of consumer payment services, including PayPal’s Venmo and Square Cash, and only confirm that competition in the consumer payments space is about to kick into high gear.

The reason? We're at the early stages of a internet-scale transformation that will fundamentally change how we all use money. Messaging money is quickly becoming as popular and easy as sharing text messages, emojis and photos. And the ease, speed, convenience and lower costs enabled by sending money digitally will continue to drive disruption across the entire economic landscape for consumers.

How transformational is the shift going to be? Remember when email was a novelty? Today, total first class mail volume is almost half of what it was 20 years ago. Remember when sending a text message came with a separate charge? Today it’s totally free and the most widely adopted communication technology in history. Remember how impossible it used to be to share photos and videos? These transformations were incredibly disruptive and altered how we communicate with each other and share content and experiences.

The same principles that gave rise to email and the commercial web are now being applied to how we send and receive money. Today you can message money as easily as sending a text message. And cash is disappearing — especially among millennials. A survey of 1,006 millennials that we conducted in May 2017 found that over 25% of respondents had less than $5 in cash in their possession, which makes sense considering the fact that 48% of all respondents view money as a digital asset.

It’s clear that the future of money is digital and is giving rise to mobile payment apps.

Even the Federal Reserve has acknowledged that mobile payments are going to accelerate quickly now that consumers have begun to better understand the technology. This transformation is being accelerated by a new class of consumer internet companies that provide social payment apps.

Recent reports from Aite Group examine the soaring growth of mobile P-to-P payments.

By Aite’s estimation, the percentage of American consumers who will send a P-to-P payment is likely to triple, growing from 11% in 2016 to 35% in 2020. This growth is thanks to new payment rails like the bitcoin blockchain, social internet trends and consumers who are growing increasingly comfortable with managing their finances from their smartphones.

This huge change in consumer behavior means that the stakes for companies competing in the financial services space have never been higher.

Companies like Western Union today sport a $9.2 billion market cap. But they may face a future that looks more like the U.S. Postal Service’s did back when “You’ve Got Mail!” was chiming across AOL. The future is upon them.

For reprint and licensing requests for this article, click here.
P-to-P payments Retailers Apple Zelle Venmo Square ISO and agent