Apple Opens NFC Gates: PayPal, Block Set To Transform iOS Checkout, But At What Cost?

Apple Inc's AAPL iOS 18.1 could be a boon for PayPal Holdings Inc PYPL and Block Inc SQ, analysts say. The two companies have long been relegated to the sidelines of Apple Pay's ecosystem.

What Happened: Cupertino, California-based Apple is unlocking its NFC (near-field communication) technology, giving developers the ability to initiate contactless transactions directly on iPhones.

Until now, PayPal's interaction with iOS users was indirect, relying on its card products being buried within Apple's Wallet.

But with the introduction of NFC access, PayPal and Block have a golden opportunity to leapfrog Apple Pay's checkout process, engaging more directly with users.

This could mean more visibility and a stronger foothold on the iOS platform, potentially shaking up the mobile payments space.

Read Also: Apple To Open Its Tap-And-Go Payment System To Rivals, Settles EU Antitrust Probe

Why It Matters: JPMorgan analyst Tien-Tsin Huang says Apple's monetization model for Apple Pay is notably rare. It’s primarily issuer-based per transaction — a setup that's unique and difficult for competitors like PayPal to replicate.

For PayPal, matching this model could be a high-stakes challenge. Additionally, tapping into merchant-side monetization will require navigating a labyrinth of negotiations and could face resistance from merchants already dealing with payment fees.

While the move promises greater engagement for PayPal, the financial implications are murky. Apple's Secure Element access introduces a new dimension to mobile payments, but it comes with its own set of complexities and costs. The shift could reshape how transactions are processed and how companies engage with users, but it also opens the door to economic uncertainties and potential hurdles.

Apple's NFC release is a strategic maneuver that could redefine mobile payments. For PayPal and Block, it's a chance to enhance user interaction and visibility on iOS.

Yet, the path forward involves navigating intricate financial dynamics and securing merchant buy-in. As this story evolves, it'll be crucial to watch how PayPal leverages this new access and tackles the accompanying challenges.

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