Why is Apple Taking on Square?

I read this week that Apple wants to get into the Point of Sales business right in the iPhone, taking on industry giant Square.

Not sure what I'm talking about? Let me explain quickly - Traditionally, store owners would need a dedicated device to accept credit cards. Even in the age of computerized counters, a reader is still necessary. This applies to anyone who wants to accept credit cards, from Walmart to the weekend flea market seller.

Square created a tiny credit card reader that plugs into any mobile device and turns it into a reader. Advantages: super inexpensive (dedicated devices go for hundreds of dollars) and very easy to access.

That made Square into a huge player in an otherwise stagnant industry. They eventually went on to release their own software and are now the go-to solution for most small shops.

I spent a bunch of time in the Point of Sale world before starting Appfigures, and it's an industry I find very interesting. So, this made a lot of sense to me. But first, numbers.

Using app downloads as a proxy to understanding the opportunity here, Square's POS app was downloaded a little more than 17 million times since the beginning of 2017. That means 17 million merchants have considered accepting payments through Square in the last 4 years.

Why's Apple doing this?

Oh, I forgot to mention that every transaction that goes through Square results in a small commission to Square.

Now that Apple is in the payments business with ApplePay, they have the foundation to take on Square. Technically, the iPhone has a credit card reader (NFC) built in. Apple never allowed 3rd parties to use it, leaving Square at a disadvantage. They also have relationships with enough banks and can negotiate great rates for their merchants. And best of all, because so many people now use ApplePay, they can offer discounts on both sides of the transaction. That's a huge benefit.

But...

I sense a big anti-trust lawsuit coming if they do start to offer it. The payments industry stepped into a grey area when Chase, the bank, started offering payment processing. And while that to me looks like a bad idea, no one said anything. But Apple is under much more scrutiny these days.