On February 1st, there was an article posted on The Financial Post authored by John Greenwood and titled, "Apple Files Patent For Human ATM Network." Basically Apple applied for a patent for an app which looks for people in your location that you can bum money from. It is a really stupid idea and I can't imagine anyone ever needing to extract money from a stranger when ATMs are as ubiquitous as smartphones and there are always your friends at the same table as you that you can bum money off. However there is a more important message in the article that is overshadowed by the folly, which reads:
Once both sides of the transaction are satisfied, the lender passes you the cash. Simultaneously, a payment equivalent to the cash is deducted from your iTunes account and transferred to the lender. (Apple also charges a service fee that's shared with the lender.)
Therein lies the true kernel of interest and reveals Apple's possible intent to implement the use of iTunes Accounts for third-party transactions. In other words, your iTunes account could soon be used as a debit/credit account. Already some of us have a credit card or debit card whose security codes and password are remembered at iTunes to make purchases at iTunes handy. If Apple is planning to allow users to make third-party purchases using iTunes as a conduit to an existing bank account at say, "Bank of America" through a credit card, why wouldn't Apple take the next step and allow users to open iTunes accounts that would be a user's core account for all banking transactions hence, "iBank."
A compelling piece of evidence that Apple might be intending to reinvent the bank was their 2010 patent for an ATM. I can't see Apple going into the manufacturing of ATMs for sale to other banks. If Apple starts its own international banking system and uses ATMs with novel patented abilities, it could be years before anyone has a chance to catch up. I will discuss some of these possibilities in another article yet to be released. (Certainly one thing I would do if I were reinventing the bank would be to make it international and have deposits not needed to remain in dollars but instead one's account would be in a basket of currencies and commodities.)
Apple could also create their own currency which, instead of being a fiat currency, could be an index currency reflecting the currencies and commodities that depositors hold in iBank, and said Apple currency could be also be a chosen percentage of one's iBank holdings. The Apple ATM could act as a commodities broker portal. I must add to this that since writing the article "Amazon has announced the release of its own currency," though I don't consider their currency's abilities that compelling. It seems to be a mere novelty act. That alongside the emergence of the Bitcoin are compelling evidence that we may be on the verge of a global currency revolution. Apple is in the unique position of having both the cash on hand and the technical expertise to pull this off.
The discussion of Apple's cash hoard has been fraught with questions: Why has Apple been amassing all of that cash? Why don't they give more of their cash back to the shareholders? Why isn't Apple making more mergers and acquisitions? Why doesn't Apple get out of this hole by investing more in R&D? Why doesn't Apple bolster their stock by doing a buyback now? Could the answer to all of these questions be as simple as,"It takes a lot of cash to start an international bank?" So could it be that Apple has had its eye on reinventing banking since way before Steve Jobs died, and that is why they have been amassing so much cash?
Apple wasn't a phone company. Smartphones were emerging in the form of the BlackBerry and the Palm Pilot. The telecom landscape was fertile for the iPhone to advance the mobile internet computing revolution to what it is today. Apple isn't a b firm but isn't the internet/online banking landscape equally fertile ground for a similar reinvention? Again, Apple is the only company with both the technical expertise and the cash hoard to execute such a plan.
A quick note: If Apple were to do a massive stock buyback followed by an announcement of the creation of iBank and a stock split, I can see no reason why their stock would not explode. Apple doubters be warned!
Disclosure: I am long AAPL.