Apple consumer mobile payment move would crowd tight market

Show Caption Hide Caption Apple talking with U.S. banks for person-to-person payment service The Wall Street Journal reported Apple Inc. is in talks with U.S. banks to develop a person-to-person mobile payment service. The talks are ongoing and it is unclear if any of the banks have signed an agreement with Apple.

Apple is reportedly working on a service to allow consumers to pay each other directly from their phones, elbowing in on a market already crowded by start-ups such as Square and established players such as PayPal.

According to The Wall Street Journal, Apple is talking with U.S. banks to develop a mobile person-to-person payment service that could launch as soon as next year. J.P Morgan Chase, Capital One and Wells Fargo are among the banks Apple is reportedly in talks with about the service.

Apple declined a request by USA TODAY to comment on the report.

Shares of PayPal (PYPL) — which owns a similar P2P payment service called Venmo, as well as having its own P2P PayPal app — sank 1.8% to $36.33 on Wednesday, while Apple (AAPL) shares dropped 0.6% to $116.11.

"I don't think it's surprising that Apple would go down this route of trying to create its own peer-to-peer or person-to-person payment service," eMarketer analyst Bryan Yeager says, given Tim Cook's vision of replacing the physical wallet.

The new service would likely complement Apple's first efforts to eventually make the wallet obsolete, Apple Pay, which launched last year to allow users to make purchases at brick-and-mortar stores (and online) with their smartphone or Apple Watch. But you can't use Apple Pay to exchange money with friends, family or perhaps the kid who cuts your lawn.

Several other companies have long since jumped into this aspect of the mobile payments business, including PayPal, Google, Facebook, Snapchat and payment processing company Square, via its P2P payments app Square Cash. If the Apple rumors prove to be true, the news could prove damaging to Square, which is preparing to go public.

Several banks also offer P2P capability through their mobile apps.

"It'll be interesting to see what approach (Apple) takes," Yeager says. "I don't think they necessarily go it alone."

Bank of America, Capital One, Chase, FirstBank, U.S. Bank and Wells Fargo use a P2P system called clearXchange. Venmo and others rely on the Automated Clearing House or ACH to make electronic transfers.

But the sheer popularity of the iPhone presumably would make Apple a major P2P player from Day 1 and also help drive the Apple Pay side of the business.

Through Apple Pay, Apple competes against the rival Samsung Pay system, which recently launched, and against Google's Android Pay, which morphed out of Google Wallet. Google Wallet still exists as an app that lets you exchange money with other individuals.

"Apple wants feature parity with Google to keep people in their ecosystem," Yeager says.

Though it has been around for years, the mobile payments business is really still in its infancy. But it seems about to explode. According to eMarketer, about one in five smartphone users will use their phones to make point of sale purchases next year, with mobile payment sales exceeding $27 billion, or triple the amount in 2015. And those figures don't factor in the type of P2P payments that Apple is likely getting into.

Follow Brett Molina on Twitter: @brettmolina23. Follow Ed Baig: @edbaig