Apple Inc (NASDAQ: AAPL) is planning a service to allow vendors to collect contactless payments through their iPhones, according to sources that spoke with Bloomberg.
Due to its ongoing development, the specifics on how the feature will work aren't clear yet. However, a 2020 acquisition by Apple paints a reasonably clear picture of the direction the tech giant is likely to head.
Mobeewave Inc, a Canadian startup acquired by Apple, had been developing payment technology using NFC technology. At the time, I remarked that Apple was likely looking to become competitive with then-named Square Inc (NYSE: SQ) in the same way that it had rolled out other proprietary features to cut into competitors' markets, an assumption that seems to be coming true.
According to the unnamed sources, Apple could roll out the software in a future software update. Given the native NFC capabilities of modern iPhones and its existing widespread use through Apple Pay, the company's payment processing could be instantly available to countless vendors. However, whether or not the features will be integrated within Apple Pay isn't known.
The move now puts Apple into a position to compete with Block Inc, the rebranded holding company behind Square. The move also puts Square in a precarious situation if Apple restricts access to the newly enabled NFC features.
Current market-leading payment processing app Square is notable for requiring proprietary software to enable its services. Should Apple enable payment processing but restrict NFC usage by third parties, Block's flagship product could face stiff competition from the tech giant.
Other competitors such as PayPal (NASDAQ: PYPL) have worked to expand their presence, making accepting payments using apps, or even low-tech solutions such as QR codes, putting further pressure on Block regardless of Apple's rollout plan.
Similarly, regardless of Apple's decision to allow or restrict usage of its NFC chip, Block stands to lose at least a little bit of its market share to the former. Especially if Apple packages its new features within Apple Pay, consolidating the services together for vendor convenience.
Apple had a solid performance at the market last week, gaining 6.4% by market close on Friday. Block, meanwhile, took a midweek stumble that drove it below Monday's opening price. Block shares were down 2.7% by Friday's close.