PayPal has announced its latest move in democratizing mobile payments to SMBs. It has enabled Tap-to-Pay functionality for Venmo and Zettle (two apps it owns) on iPhones in the U.S. It previously activated this functionality within Apple Wallet, but now brings it directly to Venmo and Zettle’s iOS apps.
To be clear, what we’re talking about here is not just paying for things by tapping your phone against a compatible POS terminal – which has been around for a while. Rather, this is the ability to accept tap-to-pay transactions using a smartphone… thus sidestepping the need for a costly/bulky terminal.
This trend has been picking up over the past two years for both iOS and Android… which is good and bad news. It’s bad news for POS terminal providers, or at least a segment of them. And it’s good news for small SMBs like farmer’s market merchants or “deskless” SMBs that transact on the road.
POS payment terminals are still safe in retail locations where phone-to-phone payments aren’t necessarily additive. But for transient merchants or “very small businesses” (VSBs), this is an empowering trend. PayPal now opens up the optionality further for those with Venmo and Zettle apps.
Puzzle Pieces
Backing up, how did this trend come about? In 2016, Apple brought NFC to the iPhone. This enabled iPhones to complete transactions by tapping them on compatible POS readers – a key piece of the Apple Pay puzzle. It then spent years forming partnerships with retailers and POS providers to achieve ubiquity.
Then came the next piece in the puzzle. In February 2022, Apple activated its massive network of NFC chips to not only tap to make payments but to accept them. It did this through an over-the-air iOS update, thereby turning every iPhone into a point of sale and democratizing payment processing.
This was empowering to highly-mobile SMBs, as noted. We’re talking about home services professionals who can process payments directly at the job site. There’s also a long tail of VSB food trucks and farmers’ market merchants that increasingly conduct business outside of a traditional storefront.
But Apple’s Tap-to-Pay framework is only as good as the payment gateways that work with it. Fortunately, Apple’s massive installed base attracts apps and service providers keen on scale. So it onboarded top payment gateways like Stripe and PayPal – first within Apple Wallet, then to other apps.
Trickle-Down Effect
That brings us back to the present, where PayPal now broadens Tap-to-pay’s surface area by extending it to Venmo and Zettle iOS apps. As it continues to expand in these ways, Apple opens up the Tap-To-Pay possibilities to a larger swath of SMBs that use these apps as primary payment methods.
PayPal is motivated to lean into this trend because Tap-to-Pay is a customer acquisition and retention hook. Expanding growing coverage also impacts the value and functionality itself. In other words, this Tap-to-Pay is propelled by network effect: both payer and payee have to be compatible for it to work.
So with PayPal, Venmo, Zettle, Stripe, iOS, and Android all in the mix, it engenders a compatibility matrix that benefits everyone. Those who benefit most – beyond stakeholders like PayPal, Apple, and Google – are VSBs. This segment of the SMB continuum continues to be empowered as tech trickles down.
There’s also a good product market fit: The Venn diagram between Paypal (including Venmo) and VSBs has a meaty center. Many already use Venmo for example. They do so by manually typing in account credentials during crowded farmer’s markets. Now their customers can just tap and be on their way.
