Apple Pay vs. Venmo vs. Square

You might not realize it from the Apple zombie dominated media, but Square and eBay Inc.’s (NASDAQ: EBAY) PayPal are giving Apple Inc.’s (NASDAQ: AAPL) a serious run for its money.

Venmo, the free payment app from PayPal’s Braintree subsidiary, processed $700 million worth of payments in the third quarter of 2014. Not bad for a free social media app that is only basically used by twenty-something hipsters. Venmo allows private individuals to send money to each other over social media so PayPal has not made any money from it yet.

Braintree and Venmo CEO Bill Ready wants to change all that by letting merchants take Venmo payments in exchange for a fee. Venmo does work a lot like Apple Pay; you can use it to take money out of a PayPal digital wallet, a bank account, or a credit card balance and send it to somebody digitally. You just cannot use it to pay your bills or buy something at a store yet—unlike Apple Pay, no cash register accepts it.

Judging by his comments to Bloomberg, Ready seems to view Venmo as another means of accessing Braintree’s payment solution. Braintree’s payment solution is a sort of Google of finance—a platform that accepts a wide variety of payment methods. The interesting thing is that Ready is not the only one trying to build such a solution.

Square Inc.

Jack Dorsey, the founder of the privately held Square Inc., was even more explicit about his company’s future in a recent chat with CNN. Dorsey even admitted that he wants to take Apple Pay at some point in the future. Square’s credit card readers can accept payments through iPads and iPhones as well as Android devices, but they cannot accept payments from Apple Pay right now.

“We’re not building a credit card,” Dorsey said. “We’re not building a payment device. We’re building a [cash] register, and this register accepts all these forms of payments.”

Square’s latest product is a digital cash register called the Square Register, which can be installed on any computer or tablet. That way any business can accept credit cards using it. Square is also sending out free card readers to its customers.

It sounds as if Mr. Dorsey does not want to be seen as competing with the credit card industry or getting into disputes with big card providers like MasterCard (NYSE: MA), American Express (NYSE: AXP), and Visa (NYSE: V). Perhaps Mr. Dorsey does not like the idea of biting the hand that feeds him.

Square has also tried to launch its own payments apps called Square Cash and SnapCash. Square Cash is a payments app similar to Venmo and Apple Pay; SnapCash is a variation of Square Cash reengineered to work over the popular social network Snapchat. In other words, it’s Square’s answer to Venmo. One difference is that it can work with merchants that use Square.

Okay, we’ve looked over the three major contenders in payments. Apple Pay is the media favorite, but my money is on PayPal because it has the experience and the technology. I wouldn’t count Square out yet—because of its technology and good relationships with the financial services industry.

Apple Pay, of course, has the advantage of credibility and a well-known name. It might not be accepted by the hip, young millennial, but it is accepted by the millennial’s dad, the guy with the Amex card in his pocket and the bank account.

The Dark Horse

The dark horse in this battle, which reminds me of the browser wars between Google Inc. (NASDAQ: GOOG) and Microsoft, is Current C, the payment app being developed by the Merchant Customer Exchange, or MCX, which has the backing of Big Retail. The big retailers in the Exchange, which include such giants as Wal-Mart Stores Inc. (NYSE: WMT), Target (NYSE: TGT), and Kroger (NYSE: KR), are refusing to take Apple Pay until Current C is up and running.

The problem with Current C is that nobody actually knows whether it works or not or how it works. The app is quietly being tested at a few Target stores in Minneapolis by Target headquarters staff before its first test with customers. One reason for the slow roll out is that there has already been at least one data breach at Current C. Big retail is really nervous about data security right now after the data thefts at The Home Depot (NYSE: HD) and Target. Home Depot actually blocked Apple Pay in its stores, probably for security concerns.

Current C could provide a unique opportunity for Square because Square already has the technology the MCX needs. If MCX’s app doesn’t work, they’re likely to turn to Square or perhaps to PayPal when it gets spun off into an independent company next year. Another strong possibility is that a big bank or one of the credit card giants, probably American Express, will try to buy either PayPal or Square.

Keep watching, folks, because the payment wars have just begun and Apple is far from being the victor. Instead, Apple Pay will launch the war by showing the public how convenient payment apps are.