It should be common sense by now: consumers flock to technology that works for them rather than curbing their lifestyles to fit a product. In the rapidly evolving mobile payments space, we’ve seen too many providers try to force consumers’ hands, namely Google with its use of NFC in Google Wallet. Consumers have repeatedly rejected the need for mobile pay but are all ears when it comes to ways that a smartphone can make their lives easier.
It’s easy to forget that the vast majority of our interaction with e-mail, news, travel and social media comes through a smartphone. Shopping, too, has found its way into smartphones, through avenues like Amazon Mobile and the iTunes Store. The in-store shopping experience, however, is less developed on the mobile end and has obvious ramifications for payments at brick-and-mortars. The company that may be best positioned to serve this ‘proximity payments’ market is Apple.
Though not as seasoned in the payments space as say, Google, Apple certainly has the infrastructure to make some noise. It owns over half a billion credit card numbers through its iTunes Store and boasts a highly successful point-of-interaction (POI) tool in Passbook. More importantly, Apple is likely to take a backwards approach to payments, delivering a superior user experience ahead of payment reconfiguration, potentially avoiding the friction incurred by other wallet providers.
Expect Apple to place heavy emphasis on customer loyalty incentives and social plug-ins, letting mobile pay come as a secondary convenience. To get there, the company can leverage its users’ mobile footprint to bypass the burdensome information-entry stage. Why would a consumer roll the dice on a third-party solution with which he has no previous affiliation when his iPhone is already loaded with contacts, credit cards and loyalty apps?
To transform a user’s history with iOS into a serviceable wallet, I expect Apple leverage Passbook. The tool connects to disparate apps behind the scenes to quickly pull up store coupons and event tickets. My check-in at the Westin and Amex purchase at their restaurant seamlessly appear in Passbook as a loyalty card and digital receipt. Loyalty information and proof of purchase detail (boarding passes, e-tickets, etc) are stored in QR codes and can be easily transmitted to external readers with one quick tap.
Now imagine the marketing potential: coupons appear on a user’s iPhone outside a Macy’s outlet and loyalty points are displayed immediately after the location-driven purchase. The user can get this 360-degree view of the shopping experience, along with her month-to-date spend on clothing, as Passbook integrates with the store loyalty program and her financial accounts. Having ready access to card information, Passbook may also be a candidate for facilitating P2P pay or auto-filling payment credentials in m-commerce checkout.
Apple will make every effort to protect Passbook’s simplicity, should the company decide to transform the POI tool into a mobile wallet. Right now, Passbook is merely a centralizer, offering few functions by itself. I would expect Apple to uphold Passbook’s simple UI and limit its in-app functions to account management, P2P pay and PFM. Balancing capability with complexity is a challenge that every wallet provider has had to face but one that I believe Apple will handle well.
Up until now, Apple has taken a cloud-based approach to data transmission but faces industry pressure to adopt NFC. If NFC is included in the iPhone 5S being released this month, Apple will have a difficult decision to make with regards to payments. NFC is the more advanced technology but has not seen substantive buy-in from merchants, who own the POS terminals that facilitate in-store payment. I expect Apple to be wary of making the same mistake Google did as well as be mindful of consumers with older phones that lack NFC.
All this said, Apple won’t be the end-all solution for the market as a whole, with iOS only accounting for 15% of the smartphone market. But, the industry is inundated with more than enough interest to develop an Android-equivalent, once Apple establishes a foothold. Apple would capture transactional revenue from P2P and in-store payments but is likely to be more interested in growing its iOS user base, which translates into recurring iPhone sales.
In a payments movement that’s more about enhancing the in-store shopping experience than paying, Apple is presented with the perfect opportunity to leverage its relationship with iOS users and build on the integrative capabilities available in Passbook. While an Apple wallet may not look like the solution described above, you get the sense that the tech giant’s entry into payments is forthcoming.