Here's How Apple Inc Will Make Money Disappear
Question: Who uses a rotary telephone or a typewriter today? The answer: Very few people. Like a magician performing his act, innovation has made many things disappear and will continue to do so. What could be the next everyday item to go "Poof!"?
If Apple has its way, it could be paper money. CEO Tim Cook suggested that the company was working on some sort of mobile payments platform earlier this year.
Globally, 85% of all retail transactions, representing 60% of the total monetary value, are now conducted using cash. However, electronic payments at brick-and-mortar stores are likely to become more prevalent over time, and Apple would like to be at the forefront of that trend.
How will the potential disruption impact business and affect investors? Should the executives at ATM manufacturers such as Diebold be worried? Credit and debit card processors like MasterCard and Visa are already benefiting from the trend to a cashless society. Could things get even better?
The obsolescence of paper money might someday be officially traced to U.S. patent No. 20140019367. That was filed by Apple in 2012 and published earlier this year.
The way it might work is that an iPhone or some other portable device would initiate the link to a point-of-sale machine at the "cash register" using near field communication. Information would be transmitted using WiFi or Bluetooth. Shoppers would not have to reach into wallets and purses to extract cold, hard cash or swipe debit and credit cards. Apple would get a fee for its handling of each transaction.
MasterCard and Visa would still be part of the system by maintaining the needed databases and processing of the financial transactions between the retailer and banks.
That would be good news for their investors. Both companies have realized solid gains in revenue, EPS, and stock price over the last five years by taking advantage of the recovery from the 2008-2009 financial crisis and the movement away from cash in both emerging and developed markets. Visa CEO Charles Scharf projects solid growth resuming later this year, as economic conditions improve even more and the trend to e-payments continues.
The next industry to crumble
In 2010, Apple released the iPad and it quickly affected the PC industry. While tablets have flourished, growth in PC shipments has suffered. Apple could cripple the ATM industry if its mobile payments system takes off in a similar fashion.
Companies like Diebold, which has reported flat revenue and drooping EPS recently, could throw in the towel on ATMs and focus more on other aspects of its business -- or get into an entirely different line of work. Investors might want to look instead at Apple, MasterCard, and Visa.
An Apple mobile payments system could disrupt another industry, just like the iPad radically altered the PC business and enriched shareholders of the iconic tech giant. Companies like Visa and MasterCard should continue to benefit positively from the ongoing trend to a cashless society. Others, such as Diebold, could suffer. Investors should keep an eye out to what comes out of Cupertino. Tim Cook could be pulling a rabbit out of his hat.
The biggest thing to come out of Silicon Valley in years
If you thought the iPod, the iPhone, and the iPad were amazing, just wait until you see this. One hundred of Apple's top engineers are busy building one in a secret lab. And an ABI Research report predicts 485 million of them could be sold over the next decade. But you can invest in it right now... for just a fraction of the price of AAPL stock. Click here to get the full story in this eye-opening new report.
The article Here's How Apple Inc Will Make Money Disappear originally appeared on Fool.com.Mark Morelli owns shares of Apple. The Motley Fool recommends Apple, MasterCard, and Visa. The Motley Fool owns shares of Apple, MasterCard, and Visa. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
Copyright © 1995 - 2014 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.