A man holds an iPhone 6s Plus as the Apple iPhone 6s and 6s Plus go on sale at an Apple Store in Los Angeles, California September 25, 2015. REUTERS/JONATHAN ALCORN
A man holds an iPhone 6s Plus as the Apple iPhone 6s and 6s Plus go on sale at an Apple Store in Los Angeles, California September 25, 2015. Reuters/Jonathan Alcorn

Tech giants are looking into person-to-person money transfers as the next big thing. However, with the growing list of competitors and the mounting challenge to increase Apple Pay adoption, Apple should be willing to lose money in the short term for long term gains, according to analysts.

There seems to be a bug sweeping across Silicon Valley as major companies take an interest over sending cash to friends via mobile apps. However, this has also become an unprofitable field leading to almost no transaction fees. Nonetheless, Apple seems interested over the matter even with Paypal, Venmo, Google, Facebook and Square already into the mix.

According to Bloomberg, Apple has been talking to banks on the use of Apple Pay to allow users to send money to friends. However, if the company really wants to compete in this field, analysts suggest that it will need to get rid of charges and allow users to send free via their debit cards.

Person-to-person money transfers are expensive to facilitate. Apple can lose out on the transactions. Bloomberg cites insights from research firm Crone Consulting. For instance, Apple can lose around US 50¢ to $3 (AU 0.68 to $4.11) on the set up and account validation alone. There will be additional charges on other transactions. It remains puzzling to other analysts how companies see think they can earn money from person-to-person money transfers.

The upside is that Apple will most likely benefit from increased adoption of the Apple Pay. The company has yet to see its mobile platform take off and this venture can boost usage but to a certain loss of money.

“We think of it as an engagement play; there’s a monetisation aspect that comes second,” said Jo Lambert on how such transactions can become profitable for companies. Lambert serves as vice president at PayPal.

“Our P2P customers are some of our most engaged customers across the board, in other actions as well. They spend more with PayPal, and they spend more with us overall,” he added. Their Venmo subsidiary is looking into joining in-store payments.

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