Perhaps part of those "amazing" software and services that Apple has coming could be its entry into the mobile payments market, which is currently being dominated by Square, eBay's (EBAY) PayPal, and very few others. Google's (GOOG) had little, if any, commercial success with Google Wallet, and Isis,, a service from AT&T (T), T-Mobile (TMUS) and Verizon (VZ) draws more inquisitive looks than those company's would like.
Apple is one of the most well-known and respected brands in the world, and as the mobile payments industry continues to take shape, it may be poised to dominate, like it did with the MP3 and tablet markets, and smartphones, until very recently. Citi research estimates that mobile payments "could see a transaction value of $1 [trillion] by 2016," though there are various wide-ranging estimates on how big it could ultimately be.
In a recent research note, Morgan Stanley analyst Katy Huberty noted that mobile payments could be the next killer service for Apple. "Most interesting to us is the potential for a killer service, like mobile payments, to better monetize the 500M+ account base and drive further differentiation and share gains in mobile devices," Huberty wrote in her investor report. She rates Apple "overweight" with a $540 price target.
Cook's comments on the mobile payments industry from the conference call may continue to add fuel to the Apple fire. He emphasized that the industry is "just getting started and just out of the starting block," saying it's in its "infancy."Channing Smith, portfolio manager at Capital Advisors Growth Fund says the 500 million iTunes accounts continue to make it harder for customers to move outside the Apple ecosystem. "The more content Apple users acquire, the higher the switching costs and the higher the likelihood that Apple users upgrading their existing products," Smith said in a recent email with TheStreet. Combined with Passbook, Apple's app for holding movie tickets, gift cards, and coupons, iTunes could be a mobile payments power house. Huberty noted that Apple's content, software and services revenue is now on an annual $16 billion run rate, up 30% year-over-year, and it's clear that Apple is looking to expand that number.
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