With Its In-House Move, Apple Once Again Could Shake Up Payments

Almost eight years after it launched the Apple Pay mobile-payment service, Apple Inc.’s purported move to bring some of its payment-processing and financial-services operations in-house once again could shake up the payments industry.

Just how, though, is a big unknown at the moment. Cupertino, Calif.-based Apple is not commenting on the effort first reported Wednesday by Bloomberg. The news service said Apple is “developing its own payment processing technology and infrastructure for future financial products, part of an ambitious effort that would reduce its reliance on outside partners over time.” The report cited unnamed sources. An Apple spokesperson did not respond to a Digital Transactions News request for comment.

Operations under the so-called project, dubbed “Breakout,” that could be affected include payment processing, credit checks and credit card risk assessment, fraud control, and some customer-service functions such as dispute resolution, according to Bloomberg. But Bloomberg said the project is more focused on future products and services than on existing ones. 

Apple’s current payments lineup includes Apple Pay, which is the leading service of its kind; the Apple Card, a credit card issued by Goldman Sachs Group Inc.; and Apple Cash, a service linked to Apple Pay that lets individuals pay one another or merchants through an Apple iPhone, Watch, or iPad, called Tap to Pay with iPhone. Apple recently said it has plans for the iPhone to function as a payment card-accepting terminal.

Apple has become such a major player in payments that any big change in its operations could have a big effect on its suppliers. Besides Goldman Sachs, its vendors include Norcross, Ga.-based payment processor CoreCard Corp. and Texas City, Texas-based prepaid card and banking services provider Green Dot Corp. Shares of both CoreCard and Green Dot dropped Wednesday after news about Apple’s plans broke, according to Bloomberg.

CoreCard in December changed its name from Intelligent Systems Corp. The company’s recently filed annual report says CoreCard got 71% of its 2021 revenues from Goldman Sachs.

But with Apple not talking, “to say we don’t have a complete picture is an understatement,” says Tom Noyes, managing partner of StarPoint LLP, a Davidson, N.C.-based strategic advisory firm to payments companies, and a former Citigroup Inc. executive.

Noyes doesn’t believe Apple will do anything to disrupt Apple Pay or the Apple Card, which he calls “an amazing success … they have done a great job of making payments work for them.,” says Noyes.

But Noyes notes people often forget that Apple is a major merchant, and, citing estimates from a source he wouldn’t name, says Apple is paying about $400 million a year in interchange. 

An expense that large gives the company an incentive to take further control over its payment operations.

“Apple wants to own the processes by which their core businesses run,” Noyes says.