According to multiple sources, Apple was in acquisition talks with mobile payments company Square before the announcement of Apple Pay.
Apple reportedly wanted to acquire Square before the unveiling of the company's own mobile payment system on Sept. 9, in the same event where Apple launched the new iPhone 6 and iPhone 6 Plus and the Apple Watch.
Sources said that Square ended the acquisition talks due to the price being discussed. Apple was willing to pay $3 billion to acquire Square, which is a price that is only around half of the $6 billion valuation that Square expected to raise at the time.
Square was able to attain the $6 billion valuation after a recent filing made by the company was able to raise another $100 million in fresh capital. Earlier in the year, the company was able to raise its valuation to $5 billion after a secondary offering of the company's shares.
Square declined the $3 billion offer. Despite the fact that the simple payments platform of Square looked like a perfect fit for Apple, the difference in the acquisition offer price and the company's valuation was too big of a gap.
During the discussion of the acquisition, Apple representatives also showed Square executives a software register, services for booking spas and restaurants and a payment system for the iPhone, which were likely early versions of the Apple Pay system. The items were not received well by the Square executives, who thought that Apple's products will be competing with Square's own line of payment solutions products.
There have long been rumors of Square filing for an IPO, but the company has yet to file for it due to concerns on revenue growth for the company, along with the currently unattractive conditions of the market.
Square's spurning of the $3 billion offer prompted Apple to turn to Stripe as the company's payments processing partner for Apple Pay.
Apple Pay will allow users to pay for purchases at Apple's partner retail stores through the user's iPhone 6 or Apple Watch.
Apple is looking to put security concerns over mobile payment systems to rest with the security measures that the company added in Apple Pay.
To use Apple Pay on an iPhone 6, the account holder must first authorize the payment through a finger scan on the smartphone's Touch ID scanner. For the Apple Watch, Apple Pay transactions are automatically blocked if the device is removed from the wearer's wrists.
"Apple Pay has already signed up major issuers that control 83 percent of the credit card payment transactions today in the U.S. Also, 22,000 retailers have signed up," said Citi senior research analyst Jim Suva, showing the early popularity of the mobile payment system.