Will Apple start to enter the mobile payments sphere?

Wednesday 13 June 2012 | 12:49 CET | Background

Apple's recent announcement of its new Passbook app has already led to much speculation of what it will mean for the mobile payments space. The general consensus is that it will eventually lead to NFC on the iPhone and that it will be a boost to mobile payments in general.

At its most recent developers conference in California Apple has, amongst others, revealed a new app called Passbook, which will be available with the new iOS6 update this autumn. To start with this app is meant for ticketing, coupons, boarding passes and loyalty cards. Users scan the pass with their phone and then show it at entry. Passbook can also automatically display the pass on the phone's Lock Screen based on a specific time or location. For now it is about ticket aggregation, so you can combine tickets and loyalty cards in one convenient place. However, there has already been much talk that this is the start of an Apple mobile wallet and so it will ultimately be used for mobile payments too.

Apple has made a pre-release developer version of the iOS6 to encourage developers to begin exploring the new possibilities of Passbook and the other new features.
Two examples given of the immediately intended usage of Passbook are:
• You buy movie tickets online. You show up at the cinema. Rather than fumble around for your pass, your phone’s GPS senses that you’ve arrived, and your electronic ticket pops up on your phone automatically, ready to be scanned.
• You’re going to the airport. You’ve checked in already via your phone. Passbook is scanned as you go through security. If your gate has been changed, Passbook will let you know of the change instantly, in real time, from within the app.

However, you can also already use it to pay for goods, because several retailers have agreed to use and integrate Passbook, such as Starbucks with their mobile payment app. It is expected that more retailers will announce how they plan to use Passbook by the summer.

According to quora.com the Passbook interface presents the user’s personal items in a smartly designed card-like interface that is updated live as things change. Passbook is a truly open system which any retailer can use, regardless of which payment company will process the payment.
The lock screen facility will allow retailers to push advertising, including discounts/offers/ incentives to users based on a number of criteria including location. Furthermore retailers can use the Passbook app to notify users of balances on their registered gift cards or loyalty cards.

So far, the information released on Passbook points mostly to QR-codes for scanning but the consensus in the press is that this is a good indicator that NFC will be coming to the next iPhone.
iOS 6 will also be made available for iPhone 3GS and higher, iPad and the 4th generation iPod Touch, none of which support NFC and/or a secure element. While this is an attractive user base, it means that all Passbook services will use the screen and built-in camera for scanning data. This can be a QR code, but traditional 2D barcodes or digits will also be supported. NFC could follow at a later stage.

Apple is trailing the other major vendors to commit to NFC, and/or Secure Element functionalities. If indeed the next iPhone has both, it can be expected that Apple will support card emulation and payment systems via NFC. NFC readers are becoming more present at many retailers, helped by Visa and Mastercard who have set themselves the task to have more NFC accepted by 2014. It seems unlikely that Apple would want to become another payment company like Visa or Mastercard, but it seems to be cleverly using the existing infrastructure to start the process of entering into the mobile payments sphere. The existing iPhone user base is compelling enough for app developers and retailers to work with.

As a recent Aite Group report showed that is the smartphone owner who is pushing mobile payment forward, it is no surprise that Apple want to be part of this. Aite’s research showed that not only are smartphone owners more likely to have already used their mobile phone to make payments, the vast majority of smartphone owners also expects to make use of mobile payments or mobile banking in the coming six months.

It is to be expected that once the Passbook app has become more of a real mobile wallet, it will be the start of a real uptake in mobile payments, as Apple’s iPhone remains one of the world’s most popular smartphones.

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