Apple Pay Vs. PayPal And Others: The Race For Mobile Payment Dominance

The mobile payment industry will shift into high gear on October 20 when Apple Inc. AAPL launches its first mobile payment solution, Apple Pay. Bloggers expect Apple Pay to be a game-changer for small businesses, but what about the rest of the mobile payment space?

"I think Apple has an opportunity to make a huge difference," CRT Capital Group analyst Neil Doshi told Benzinga. "It looks like the iPhone 6 has been a pretty big success. The way they've rolled out Apple Pay, providing very secure opportunities for transactions (and the fact that you're not really storing all your card information on the device) makes it much more appealing."

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Doshi expects PayPal, Google Inc GOOGL, Amazon.com, Inc. AMZN and Facebook Inc FB to battle for payment dominance on desktops. On mobile, he thinks Apple could be a "very big disruptor." "PayPal has not had very good success in the offline world, and they've been trying very desperately for the past two, three, four years to try and make headway there," he added.

"It took them three years after Square came out with the card reader for PayPal to come out with their own version of a card reader. That just shows how far behind the curve they are for innovation in the offline world. The fact that now Apple's come out with this embedded in its device, I think Apple could really lead the way for mobile payments. I think that's going to be a big competitive threat to PayPal."

Is Exclusivity A Good Thing?

Apple wants to encourage consumers to buy a new iPhone by developing Apple Pay exclusively for select handsets. Could this limit the platform's short- or long-term potential? "I'd be more likely to use [PayPal] because it's going to appear on more phones," Rob Enderle, principal analyst at Enderle Group, told Benzinga. "Apple is going to require you to have an iPhone, and for anybody that doesn't have an iPhone, that's going to be kind of problematic."

Despite his preference, Enderle doesn't plan to use either platform for mobile payments. "I think we're still kind of waiting for the end all, be all company to step in here," said Enderle. "I think PayPal has the best chance of being that firm, especially when they spin out. The problem is, they gotta spin out first and that's gonna take 'em a while. While they're spinning out, everybody and their brother is trying to get into their market."

Enderle currently gives PayPal a little bit of an edge over Apple. "But because [PayPal is] going to be distracted for a while by going public, not much of one," he added.

Apple Pay's Potential

David Goldin, CEO of AmeriMerchant (a provider of working capital solutions for small and medium-sized businesses), expects big things from Apple Pay. "If it's an auto repair shop, I don't think you're going to start seeing them use Apple Pay anytime soon," Goldin told Benzinga. "I think in high volume, busy places, especially places that have a busy lunch crowd -- delis, convenience stores -- I think you're gonna see [Apple Pay] because it does get people through the point of sale much faster."

Goldin argued that Starbucks Corporation SBUX has already proven that this model (of paying by phone) can be very successful. "Just like every study has shown that people tend to spend more when using a credit card versus cash, I think they're more likely to spend more when they're using their phone because you don't really feel it," Goldin added. "It's almost like using a chip in a casino when gambling."

Goldin referred to PayPal as a "juggernaut" but said he wouldn't bet against Apple. "It may not be an overnight success, but I think it will be a long-term success," he concluded. "I just don't see them failing. I think they're gonna be disrupting a lot of companies and payment-related businesses. You gotta watch out. Apple could roll right over you."

Disclosure: At the time of this writing, Louis Bedigian had no position in the equities mentioned in this report.