Apple’s Actions Spur Mobile Payments Speculation, Present Opportunities

Navigator Edition: September 2012
By: James Watts and Dara Khan

Apple’s iPhone 5 debuted September 21st after several months of fanfare and, as usual, rumors that this might be the iteration that includes NFC technology for payments.  These theories were refuted in the days leading up to CEO Tim Cook’s keynote address at the fall media event on September 12th.  The speculation on whether Apple will enter the increasingly crowded mobile payments space is fueled by a number of activities.  These include:

  1. PassBook, which digitally stores tickets, loyalty and gift cards;
  2. EasyPay, a self-checkout tool;
  3. Express Checkout, which enables online purchases with in-store pickup;
  4. NFC patents filed by Apple, and;
  5. Mobile security acquisitions

Apple’s long-term intentions are still unclear.  Retailers, issuers, the card networks, and other payments players can benefit from understanding Apple’s capabilities and evaluating how best to incorporate similar features into new and existing offerings.

Merchants can learn from how Apple uses mobile commerce to facilitate process improvement.  PassBook is one example.  It can help merchants reduce friction related to boarding, check-in, or going into various applications to access mobile payments or marketing.  This includes airlines and other travel entities that support mobile ticketing and retailers that scan QR codes for gift cards, loyalty cards, and coupons.  PassBook can be used to improve  convenience by allowing merchants to utilize time and proximity features to simplify mobile payments or check-in.  For example, loaded payments cards or airline tickets  can appear on the lock screen of the phone when nearby a store or before a flight begins boarding, respectively.  Balances, points, and other data can also be presented and updated in real-time.  Target, Starbucks, United Airlines, and are already integrated, and other merchants are expected to support their payments, ticketing, and marketing products in PassBook.

Apple utilizes EasyPay and Express Checkout to enable quicker transactions using the payments credentials customers already have linked to their iTunes accounts in stores.  Similar technology can be utilized by other merchants.  Some already enable online or remote mobile purchases with pickup in-store, but self-checkout is less common.  Issuers and retailers could position their co-brand and private label cards as the default payment method in similar self-enabled checkout tools.  These services could also be integrated with merchant or issuer-developed wallets already in the market.  As the holiday shopping season approaches, merchants that expect to offer a mobile point of sale (POS) solution for line-busting should consider whether a self-checkout option for their customer base makes sense, and how they can integrate the functionality into their existing mobile apps.

Several of Apple’s submitted patents are now publically available.  Though the iPhone does not have NFC, the patents make clear that the technology is top-of-mind for the company.  These documents envision NFC being used to redeem offers and interact with products in stores.  The patents also hint at P2P and top-up capabilities, functions commonly associated with mobile prepaid.  Apple has other mobile payments-related technologies in the works.  Earlier this year, Apple acquired mobile security developer Authentec for $356 million.  The company specializes in fingerprint scanning and has several patents related to mobile payments authentication.  These capabilities could help solve for any outstanding security concerns surrounding a future mobile payments play.

Regardless of how Apple’s approach to mobile payments unfolds, its history suggests it is a fast-follower and will wait to develop a product that is tailored to meet customer needs.  The mobile payments, wallet, and marketing landscapes are complex and consumers are not currently adopting solutions in large numbers.  Whether the company is successful will be a function of whether Apple can successfully deploy its existing assets such as its user base and control over the mobile experience, create a better solution for payments, marketing, and shopping tools, all while offering customers a compelling enough value proposition to adopt.

For now, retailers and issuers should consider not only short term opportunities to gain early adopters, but also what long-term implications may be for existing payment and marketing practices.  Mobile presents several opportunities for merchants to capitalize on in the near-term.  Following what innovators like Apple and the other new entrants into the payments space are doing can help retailers and issuers improve existing processes in the near-term.  Early adopters may be in the best position to reap benefits as mobile payments develop.  Creating convenience for customers before competitors and developing more sophisticated merchandising and marketing strategies will be key to success.

Figure 1: Apple Mobile Payments and Marketing Applications
Source: Apple

For more information, please contact James Watts, Senior Consultant specializing in Credit Card Issuing,; or Dara Khan, Associate specializing in Emerging Payments and Credit Card Issuing,

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