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Established Territory: Apple Takes On Venmo

According to recent news Apple is beginning talks with banks to create with a P2P payment service, potentially one that will be hosted in their ever popular iMessage app. Venmo is the undeniable reigning king of P2P payments, and for Apple to invest in a service that is already so well-established indicates that the company either has a promising marketing strategy for this service, or is using this as a hook/marketing strategy for another service it provides: the more general Apple Pay.

Let us consider the former case. The network effects of the P2P market are both the reasons and means for/by which the it exists, and Apple surely recognizes that to convince anyone to use their product, they need an ingenious hook. Information suggests that by communicating directly with the banks, Apple can ‘avoid filing for money transmitter licenses,’ which may result in zero usage fees for the users (unlike Venmo, for which only debit cards and bank accounts carry no transaction fees). If Apple can charge nothing to users for the same service, that may be enough to lure people in. It would be unsurprising to see the service gain momentum–eventually converting Venmo users and dominating the market (as they have done with many product, e.g iMessage, one of the most popular messaging apps). Eventually prices would change (how can we forget that 99 cent to 1.19 price increase in iTunes), but they will have been so successful that they passed the tipping point and have little to worry about.

In the latter case let us consider the idea that Apple is rolling out this feature not to make gains. Take Facebook for example, a company that also offers this service, but at a loss. Apple P2P payments could be the hook for a different product, Apple Pay, which has been not very successful to-date. Providing a  new functionality of Apple-Pay might just be enough for that service to take off, and while P2P iMessage payments may be a not profitable, their overall earnings could still drastically increase.

It is peculiar to note and distinguish the network effects on certain goods, especially those for which is is unclear whether or not the good is meant to be successful. With this thought, a company and user must consider what the purpose of this service is before blindly following our established model for rational decision making.


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