By Leena Rao
June 6, 2017

Apple is beefing up its mobile wallet with the addition of a Venmo-like payments service that lets users send money to each other, the company announced on Monday at its annual WWDC developer conference.

The new payments service is part of Apple Pay, a mobile wallet Apple debuted in 2014 that lets users pay for items in stores, online and in apps using stored credit and debit cards. Users authenticate all payments by pressing their finger on Apple’s iPhone and iPad home button.

The new payments service is similar to Venmo, the PayPal-owned payments app that has become popular with younger users to make small, cashless transfers, such as paying a friend for dinner, using a mobile phone. PayPal has said Venmo is one of its fastest growing services, with Venmo processing more than $17.6 billion in payments in 2016, up 135% from the previous year.

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Apple’s newest service lets users send money directly to their friends, family, and other contacts stored in iMessage. The feature will be released as part of Apple’s newest version of its mobile software, iOS 11. One big differentiator with Venmo is that Apple’s payments service only allows users to send money to others who have an iPhone or iPad. Users will not be able to send money to people who have Android devices.

Within Apple iMessage, users will see a line of app icons along the bottom of every message. One of these will be the Apple Pay icon, which users can select and then set an amount they would like to pay. Users can also choose which of their accounts to send the money from. After hitting send, users must authenticate the payment by pressing their finger on their devices’ home button.

People who receive payments will see the amount added to their Apple Pay account. That money can then be used towards any Apple Pay purchases in apps or in stores. If the recipient doesn’t have an Apple Pay account, Apple will prompt them to create one.

Another key differentiator between Apple Pay’s iMessage-based service and Venmo is that users don’t have to make these payments through a separate app, like with Venmo. Venmo’s app includes a social feed of what friends have paid for, which PayPal has said is a popular with users.

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For Apple, payments are just another way to make its messaging app more useful, not more social. As Gerald Granovsky, senior vice president for financial firm Moody’s explained, Apple is playing catch up to PayPal. “But its real goal is to cement loyal users for life,” he said. [Monday’s] introductions will add a lot more stickiness to Apple’s loyal base.”

Apple also doesn’t have the burden of having to make money from payments by taking a cut of every transaction. The technology giant made $215 billion in revenue in 2016 alone through the sales of its products like iPhones, MacBooks, and iPads.

PayPal on the other hand, has been trying to make money from Venmo by charging merchants fees to use the service to accept payments. Square Cash, another rival service, has also attempted to make money from its payments service by charging merchant fees.

Meanwhile, PayPal and Venmo don’t want to appear fearful of a new competitor, even if that rival is among the world’s largest companies.

A PayPal spokesman said in a statement: “As the world’s leading open digital payments platform, we welcome any developments that help people move away from the awkwardness of cash.”

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