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Apple's New Rumored Service Could Be Bad News for PayPal

P2P payments are expected to hit $174 billion by 2019, with 30% of those coming from mobile devices. And with Paypal's Venmo taking the lead right now, the company clearly has an advantage in the space.

P2P payments are expected to hit $174 billion by 2019, with 30% of those coming from mobile devices. And with Paypal's Venmo taking the lead right now, the company clearly has an advantage in the space.

Image source: Venmo.

Apple's advantage

Apple, of course, has no position in the P2P space right now. But that doesn't mean it doesn't already have some key advantages over PayPal.

First, Apple has about 100 million iPhone users in the U.S., and at least one-third of those have Apple Pay-compatibility. That gives Apple a distinct advantage over PayPal because its Apple Pay app is pre-loaded (of course) on millions of iPhones, iPads, and the Apple Watch.

While Venmo may already be a popular service, Apple's strong brand, marketing chops, and ability to integrate a payment service onto millions of devices with a software upgrade could make Apple a strong Venmo competitor very quickly.

And this leads into Apple's second major advantage: it already has a financial relationship with every iPhone user. Through iTunes and the App Store, most of Apple's U.S. customers have handed over their financial information to Apple. For PayPal and other companies, getting users to download an app and then enter in their financial information are two huge hurdles. But for Apple, the relationship has already been established and the bank account information is already there, ready to be used in new ways.

Why PayPal's really in trouble

Launching a new P2P payment system would be a way for Apple to build Apple Pay even stronger, by giving users, retailers, and banks even more of an incentive to adopt the technology.

And that is one of the reasons PayPal should fear Apple's possible P2P entry, not just because it could hurt payments from its Venmo service, but because it shows that Apple is digging deeper into the mobile payments space -- and it likely won't stop until it dominates the industry.

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The article Apple's New Rumored Service Could Be Bad News for PayPal originally appeared on Fool.com.

Chris Neiger has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Alphabet (A and C shares), Apple, Facebook, and PayPal Holdings. Try any of our Foolish newsletter services free for 30 days . We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy .

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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