Over the past year, news of retailers moving into the crypto space has perhaps proven to be the most decisively bullish driver. Honestly, it’s never easy to gauge what’s moving the crypto market up and down in wild swings. Even so, there are bits and pieces to infer. PayPal’s 180-degree turn on crypto and full-fledged adoption coincided with the market blazing from around $18,000 to nearly $60,000 in a few months.
Last May, we’ve had the crypto market crash which brought bitcoin down to $30,000 with some force as China announced new crackdowns. What looked like the coming of another “crypto winter” was reversed soon after announcements that Amazon is planning to integrate crypto into its ecosystem. Despite a lack of spokespeople confirmation, a Digital Currency and Blockchain job opening was telling for many, and bitcoin would soon post a new all-time high of $67,000.
This January, the crypto market saw all sorts of downwards action and more talks of a “crypto winter”. While plenty of market cap was shed, the price seems even more reluctant to stay down, especially with ether posting a notably strong recovery.
Okay, that’s all background. Here’s the latest…
A new way to tap cryptocurrency funds
Apple’s initial crypto job post announcement was as tentative of a venture as Amazon’s, but that is no longer the case. Apple just announced iPhone users will soon be able to “Tap To Pay” with crypto.
The tech giant has now laid out exactly how it intends to incorporate crypto into its mobile payments ecosystem in a refreshingly clear manner. It’s pretty straight-forward. The technology already exists. Here’s how it works:
- Merchants and vendors don’t need new hardware
- iPhone owners merely connect their digital wallets as a payment source
- The same near-field communication (NFC) technology that currently powers Tap To Pay continues to do so
- Customer waves iPhone at merchant’s iPhone and payment is complete
- Apple Pay security is already layered into the payment (credit card executive Tom Noyes called it “the most secure payments scheme on the planet”)
Merchants and owners will only require Tap To Pay, a feature already used for credit and debit card payments, on their phones to accept payments with digital assets.
Certainly, it’s a way for Apple to advertise its iPhone XS which merchants need, at minimum, for this feature. For the most part, iPhone and Apple Watch users have already been sold the product.
Honestly, the whole story is so simple and straight-forward it’s barely even exciting. Oh look, here’s another payments processor treating cryptocurrency like money. Don’t be fooled. This is huge.
Why Apple’s new crypto onramp is a big deal
Let’s take a look at some numbers…
- Apple Pay is currently the top in-store mobile wallet choice with 5% of the market
- Apple Pay’s 2021 transaction volume is estimated at $90 billion
- Apple has a 52% share of smartphones in the U.S. (about 30% globally)
- Apple Pay has a 90% acceptance rate among U.S. retailers and is available in 68 other nations
- There are 1 billion active iPhones in the world today
Love them or hate them, Apple has a well-earned reputation for making new technologies easy to use. Think about it: Apple is the reason Boomers have smartphones!
This announcement means one billion iPhone owners now have a totally new onramp to cryptocurrency adoption in their pockets. Tap To Pay is already integrated by millions of merchants.
It goes without saying that a significant part of Apple’s userbase has some exposure and interest in crypto, and the ability to pay with digital assets will likely be utilized off-the-bat. From there, we are left with how this could affect the market as a whole.
The lack of crypto on-ramps and their slow roll-out has been the most persistent thorn when it comes to mass crypto adoption. Almost directly advertising crypto as a payment method to a billion iPhone users should remedy this somewhat. Besides convenience, Apple said that Tap To Pay’s key features are privacy and security. A slight nod to these key crypto qualities, maybe?
A word about security
We quoted Tom Noyes above calling Apple Pay “the most secure payments scheme on the planet.” That’s a bold claim! Apple has said credit cards are actually safer on your iPhone than in your wallet.
Sound nuts? Okay, here’s why that’s a legitimate claim (hat tip to MacRumors for the info dump):
When a credit or debit card is scanned into Wallet for use with Apple Pay, it is assigned a unique Device Account Number, or “token,” which is stored in the phone rather than an actual card number.
The iPhone itself has a special dedicated chip called a Secure Element that contains all of a user’s payment information, and credit card numbers and data are never uploaded to iCloud or Apple’s servers. When a transaction is made, the Device Account Number is sent via NFC, along with a dynamic security code unique to each transaction, both of which are used to verify a successful payment. The dynamic security code is a one-time use cryptogram that replaces the credit card’s CCV and is used to ensure that a transaction is being conducted from the device containing the Device Account Number.
Along with Device Account Numbers and dynamic security codes, Apple also authenticates each transaction through Touch ID or Face ID. Whenever a transaction is conducted with an iPhone, a user must place a finger on Touch ID or complete a facial scan for the payment to go through.
Because Apple utilizes Device Account Numbers, a user’s credit card number is never shared with merchants or transmitted with payments. Store clerks and employees do not see a user’s credit card at any point, and they also do not have access to personal information like a name or address because an ID is not required for verification purposes.
That’s… that’s pretty amazing technology.
This isn’t like a big bank or a major financial institution offering crypto custodial services. This isn’t even like Robinhood letting everyone day-trade crypto for free. This is much, much bigger! It’s the most friction-free onramp we’ve seen so far.
What’s next for crypto?
Since products won’t be priced in cryptocurrencies, for the most part, we don’t have full integration yet. That’s probably a good thing, too – imagine how big the price tags would have to be to show prices in even the top five or six cryptocurrencies?
Apple isn’t just focusing on in-person payments, either. Payments processor Stripe will be the first company to offer this service to business customers, starting with Shopify. Apple’s building the network at both ends by making it easy for both merchants and users to pay with crypto. They’re even planning to offer a software developer kit (SDK) for app developers to enable in-app crypto payments!
And by the way, Apple’s CEO Tim Cook says he owns crypto as “part of a diversified portfolio.”
Time for the big question: what will this news do for cryptocurrency prices? We come down firmly on the side of, “This is the biggest news in the last twelve months and markets will definitely reflect it.” That’s not investing advice! Like we said at the top, it’s really tough to know when crypto prices will overreact to some big news stories and shrug off others. Market analysis is easy, but accurate market analysis? Do your own research.
And if you want to do what Tim Cook does and invest in cryptocurrencies for diversification purposes, we can help you get started.