Apple’s acquisition of Mobeewave

 

Apple has purchased Canadian company Mobeewave, which will allow it to create mobile pay hubs out of iPhones, Bloomberg reported. Before we embark on the journey of understanding what the Mobeewave acquisition represents for Apple, let’s take a brief overview of Apple as a company, what are their core businesses, what are they doing today, what acquisitions they made in the past and what can we expect for future ones. Moreover, we will introduce shifts in consumers’ behavior for a better understanding of underlying implications.

 

Apple was founded in April 1976 by Steve Jobs, Steve Wozniak, and Ronald Wayne with Wayne selling his shares back within 12 days period. The first commercial product for the company was the computer. Today their products include hardware, software, and services, some of the most popular ones are:

- Mac, iPhone, iPad, Apple Watch for hardware,

- macOS, iOS for software and

- iTunes, Shazam, Apple Store, Genius Bar, and Apple Pay as representatives of other Apple products.

 

The company has 510 retail stores located in 25 different countries across the world. There are 137.000 full-time employees and the company is valued at stunning $2 trillion dollars making it a first U.S. company to hit that mark! The latest reports and estimates show Apple’s revenue being north of 260 billion U.S. dollars.

After a brief overview of Apple as a company, let us look at how consumer behavior shifted and what are the observed real-time trends. Several pieces of research showcase that COVID-19 impacted on expenditure and stockpiling behavior. Consumers are less likely to spend and take more of their income to savings accounts than in previous years. Moreover, social distancing and quarantine moved shopping and everyday consumption on online platforms thus increasing the demand for safe and accessible transactions. E-commerce and fintech businesses are most likely to prosper in these surroundings as well as they are more likely to draw the government’s help due to the increase in money injections and regulations that are being introduced to help stabilize the nation’s economy. It is beneficial to mention that there is certainly concern regarding funds for the startups due to a shortage of cash and investments, thus making them easy prays for established players with deep pockets. Before we look at the Mobeewave acquisition, previous acquisitions will be observed to better understand underlying motives.

Apple made its first acquisition on March 2nd, 1988 by acquiring a US-based software company called Network Innovations. The first acquisition was complementary to their core business, and most of them were US-based software companies. With globalization and international success, they started acquiring European companies as well as other companies worldwide. In recent years acquisitions are mostly located in the UK and other commonwealth countries. 2020 for Apple was an acquisition heavy year, with 8 acquisitions spanning from January 15th to August 25th. 

Companies that were acquired are:

1. Xnor.ai – Edge computing, AI
2. Dark Sky – Weather forecasting and app
3. Voysis – AI / Voice Assistant
4. NextVR – Virtual reality events
5. Fleethsmith – Multidevice film
6. Mobeewave – Startup
7. Camerai - AR
8. Spaces – VR Startup.

 

An increase in acquisition activity follows the previous crisis pattern since in 2010 and the following years they were very active on the market. This could confirm the suspicion that large companies are praying on startups and newer players due to crisis. Now we will shift gears and take a look at what is Mobeewave and what it means to both Apple and its competitors.

Mobeewave Inc. is a private financial service and mobile payment company based in Montreal, Quebec founded by Benjamin du Hays and Maxime de Nanclas in 2011. The company is the pioneer and currently the only payment solution that turns any Near Field Communication (NFP) phone into a mobile payment terminal. They developed their own patented technology – Bee – that allows secure transactions for both merchants and individuals.

Why did Apple acquire Mobeewave? Simply by following a pattern of acquisition it can be inferred that they are continuing a trend of buying new technologies that complement their existing ones, in this case, Apple Pay. With Mobeewave’s technology, they could make an app that would only depend on NFP chip from hardware, which is already present in iPhones from 2014. Furthermore, the estimated market for mobile payments is 3.4 trillion USD by 2022 with a compound annual growth rate of 33.4 percent, thus making it very appealing for Apple to take part. Christoffer O. Hernæs, former Chief Digital/Technical Officer in Sbanken, believes that the reasoning behind the acquisition is driven by Apple’s aspiration of partaking in the mobile payment market as well as eliminating other middlemen that are part of the value chain. However, they are still dependent on Visa and Mastercard, which makes them frenemies with traditional players. Even though banks are still part of the equation, revenue from payments is estimated at around 25 percent of the total revenue, and a significant portion of those are interchange fees, the fees that Apple is trying to sap. According to ECB, within the EU the total interchange fee amassed around 7.800 million EUR. Therefore, the impact that this acquisition will have on traditional players could come as a very harsh one.

Finally, there is still one more question to be answered and that is, what does this mean for Samsung, one of the major Apple competitors that invested in Mobeewave and signed a partnership which resulted in a pilot program with over 10.000 downloads? For now, it can be assumed that the partnership will go on due to Apple’s interest in spreading the app and partaking in the merchants’ value chain.

How will traditional players react is yet to be determined, but there will be some obstacles since the fiasco with Epic Games trying to avoid Apple’s and Google’s fees resulted in the popular game – Fortnite, being removed from their stores. This is a predicament of the gritty fight between traditional players and the future that is mobile payment systems.