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In individuals, insanity is rare; but in groups, parties, nations and epochs, it is the rule. Friedrich Nietzsche


“Venmo” for Apple Pay is Coming

Apple (NASDAQ: AAPL) just admitted that PayPal’s (NASDAQ: PYPL) Venmo is a threat. A peer to peer (P2P) payments function will be added to iMessage later this year.

P2P solutions like Venmo allow people to send money or receive funds from friends and family instantly. The leading P2P app Venmo is growing like a weed; the volume of transactions it processed doubled during first quarter 2017, Mashable reported. Venmo users sent around $6.8 billion to their friends in Q1.

Somebody at Apple has definitely noticed Venmo’s success because an app called “Apple Pay Cash” is planned, The Verge reported. Apple Pay Cash will allow iPhone users to send and receive money from Apple Pay accounts via iMessage. The Verge did not say when Apple Pay Cash will be available but it will be part of iOS 11.

Why Apple is trying to Clone Venmo

Apple is trying to clone Venmo for two big reasons. The first is that users of Apple Pay’s biggest competitor; Alphabet’s (NASDAQ: GOOG) Android Pay, can access PayPal accounts through that app. That means it might soon be possible use Venmo to send money via Android Pay.

The second is to give people a reason to use Apple Pay. Even though hundreds of banks support the digital wallet, most of the large retailers in the United States refuse to take it. That includes the nation’s largest retailer Walmart and the country’s biggest standalone grocer; Kroger.

Enabling people to send money to friends and family might get more people using Apple Pay. The digital wallet certainly needs more users, just 1% of transactions at retailers that did accept the app were made through Apple Pay, 9 to 5 Mac reported.

Will P2P ever Make Money?

Apple is taking something of a risk by experimenting with P2P payments. PayPal is still losing money on Venmo because banks and credit-card companies charge a fee for P2P transactions. The P2P provider and not the consumer pays the fee which can quickly add up.

Apple and PayPal are willing to eat the cost of those fees to grow their payment ecosystems. One has to wonder how long that can continue and when those systems will start making money?

There is a logical for tech companies to make money from P2P they can offer loans, factoring or lines of credit through the service. That would make them lenders which will attract the attention of financial regulators such as the FDIC. One has to wonder which company will bit the bullet and start offering P2P lending.