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Apple will find it difficult to challenge PayPal online

With Apple extending to the online transaction market, it faces fierce competition from the current dominant player, PayPal. Apple will need to provide a strong value proposition for consumers in order to be competitive in the market.

Apple has announced that it is expanding its payments service to the web, allowing customers using its Safari browser to finalize purchases by touching the fingerprint reader on their iPhones. By using biometric authentication for web-based mobile commerce, Apple is moving beyond instore and in-app payments to the web – where most m-commerce still takes place – and is targeting an entirely new segment of customers in an attempt to diminish the still large amount of abandoned shopping carts.

PayPal’s dominant position has allowed it to gain a first-mover advantage and acquire a loyal consumer base by recently developing enhancements that improve the buying experience (such as one-touch checkout, social and contextual commerce, and predictive fraud prevention). At the same time PayPal has a global reach and is platform-agnostic, important factors for maintaining a large customer base in the future.

On the other hand, Apple relies on strong brand recognition and biometrics authentication technology. Therefore it may have a security advantage in inspiring trust among consumers, due to the high visibility of biometric security, while making the checkout process almost as fast as PayPal’s One Touch. Apple Pay aims to create a frictionless customer experience: customers can pay quickly by selecting the Apple Pay button during checkout and authenticating the transaction using the TouchID fingerprint sensor on their iPhone, iPad, or Apple Watch.

Although the function only works in Safari for the moment, Apple has partially compensated for the platform-limited availability through an expansion of the web-based payment service into several key markets this summer, having announced launches in Switzerland, France, and Hong Kong.

It remains to be seen whether Apple can truly compete with PayPal in the online payments market, but it does have potential to become more than an additional payment option for consumers due to its fast and secure user-case experience. However, Apple’s marketing strategy would definitely benefit from extended availability on multiple platforms and a continuous effort to target key retail partners that will integrate Apple Pay into their checkout flows.

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