Apple could challenge PayPal, eBay, Amazon, and Google with iTunes-based payment processing

Written on 1:47 AM by Mujtaba

The latest Wall Street chatter suggests that Apple could be toying with an idea of extending the iTunes Store payment processing to third-party vendors selling digital goods on the Internet. If true, Apple’s iTunes-based payment processing will take aim at established services from eBay, PayPal, Amazon, Google, and others.

According to a Silicon Alley Insider report, citing unnamed Wall Street sources, Apple is considering extending the iTunes Store payment system to a number of participating third-party sites. The move move allow iTunes Store account holders to purchase goods and services across participating sites using those accounts. Apple uses the iTunes Store accounts to facilitate payments for movies, TV shows, audiobooks, iPhone apps, and other digital goods sold through the store.

If true, the move would put Apple in direct competition with popular services like Google’s Checkout, Amazon’s One-Click-Buying, and eBay’s PayPal payment processing solutions. The publication asserted that Facebook could also jump on the payment processing bandwagon with own “Pay With Facebook” platform.

Christian’s Opinion

Sounds like a plan, right? After all, why wouldn’t Apple leverage its huge ecosystem to create an additional revenue stream that could only grow over time? If you ask me, I don’t think this is a particularly sound business idea, at least for Apple, a company that expects fat margins from its every product or service on the market. In the case of the iTunes Store, Apple takes 30 percent of the revenue generated from selling iPhone apps and in-app content, in addition to music, movie, TV show, and audiobook purchases.

But fees in the payment processing business are much lower, especially for low-priced digital goods paid for through micro-payments. Third-party vendors offering digital goods priced up to couple of bucks would never agree to surrender 30 percent of the revenue to Apple. Unlike App Store developers that have no other choice but accept Apple’s terms, anyone selling products and services on the Internet can choose between a number of established services like Google Checkout, 2Checkout, and others.

Most payment processing services charge vendors a single-digit percentage (on the low-end) to cover costs associated with processing credit card payments on their behalf. With that in mind, I don’t think there’s enough money to be made in the payment processing business to justify Apple’s move into this market.

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