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What Startup Opportunities Does Apple Pay Create?

epa04393117 Demonstration on how the new Apple Pay works during Apple's launch event at the Flint Center for the Performing Arts in Cupertino, California, USA, 09 September 2014. Apple unveiled its latest iPhone at a media event held in Cupertino, California. The next generation phones iPhone 6 and iPhone 6 Plus have larger displays of 12 centimetres and 14 centimetres.The Flint Center for the Performing Arts was the site where Steve Jobs launched the first Apple Macintosh computer in 1984. EPA/MONICA DAVEY

epa04393117 Demonstration on how the new Apple Pay works during Apple’s launch event at the Flint Center for the Performing Arts in Cupertino, California, USA, 09 September 2014. Apple unveiled its latest iPhone at a media event held in Cupertino, California. The next generation phones iPhone 6 and iPhone 6 Plus have larger displays of 12 centimetres and 14 centimetres.The Flint Center for the Performing Arts was the site where Steve Jobs launched the first Apple Macintosh computer in 1984. EPA/MONICA DAVEY

As we frequently note, the Tech scene in South Florida is really taking off. The surge of software related ideas typically moves in tandem with technology advances in the mobile space. Usually, Apple is a big part of that, so we’ve been thinking a lot about what opportunities Apple Pay may create for local startups in Miami and Ft. Lauderdale.

First off, in case you haven’t heard the specifics or wrapped your head around this newly hyped technology: Apple has created a payment system (Apple Pay) that allows you to pay for items both in-store and online using your new shiny iPhone 6 or iPhone 6 Plus. They basically store your credit card info on your device, and the payment you make to someone is actually just a temporary ‘token’ code that your device exchanges with them. The vendor doesn’t have your credit card information or any personal information, so when they get hacked later on, your credit card data isn’t stolen. From the customer side you simply activate your Touch ID sensor at the register (which identifies you through your fingerprint), and it confirms the transaction quickly when you’re in a store. If you’re buying online you have a payment button you can press that pays via Apple Pay. Apple doesn’t store your credit card details on their servers, the store doesn’t receive the credit card details at all, and your phone itself is at least in theory completely secure with the Touch ID technology so even if it’s stolen it doesn’t appear anyone could get your credit card info.

So with all of that we wonder: What opportunities could exist for Tech Startups who want to start new businesses around this idea?

Well, lets look first at the psychology behind payments. Credit card transactions and cash transactions typically have one thing in common – they’re relatively cumbersome. You reach into a wallet. You pull out a card or cash. You hand it over or swipe it. A screen confirms what you’ve bought and the price. You hit OK. You may need to sign. A receipt is generated. Change may be given and has to be put away. The card has to be put away.

All of this acts as a disincentive for ‘micro-transactions’, which we’ll define as “very small value purchases sub $1”. Now, realistically, this may not matter much to a retail chain since that’s not the space they usually want to be in. But in the online world, where goods/information/products could be sold for spare change, what impact might we see?

We think we speak for most people in saying that we don’t trust most websites with our credit card information and passwords, and certainly wouldn’t go through the hassle of creating an account, setting up a login and password, confirming that account, entering our billing addresses, and handing over our credit card details for a $.75 purchase, right?

But what if none of that had to happen? And what if it was so easy to do that the end customer could complete this micro-transaction in seconds? The easier and faster something is to do, the more likely someone is to do it. And we’ve seen Apple effectively monetize music purchases by making them inexpensive and relatively fast – you hear a song, you like it, it’s $.99 and that’s just so cheap, so you click something, now you own a license to that song…

This notion of selling small value items on the internet has been an interesting one to us for years, but no one has really cracked it. The newspaper and publications folks have grappled with it for years – how do you sell someone access to an article for $1 when it takes that customer more time, effort, and risk than they’re willing to accept just to pay you that $1?

Apple Pay should change all that. We expect in the future we’ll see startups focused on micro-transactions and finding ways to sell things in high volume at low prices online. Maybe it’s stock information. Maybe it’s character improvements inside a video game. Maybe it’s an article you’re interested in. Maybe it’s anonymous purchases for things you might otherwise be embarrassed to purchase. The possibilities are endless.

And of course, we’re here to help if you’re looking for a Software Developer. Based in Coral Gables, Florida, we’ve been helping businesses and entrepreneurs launch successful software solutions for 15 years. Reach out to us for a free consultation and review of your idea.

 

 

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