It says something about the nascent state of mobile payments that the most successful example in North America is Starbucks. While many foresee the dominance of mobile payments as inevitable, it’s safe to say that no one is expecting we will be throwing away our plastic anytime soon.
The reasons for the tardiness are complex, but one of those is more than a little distrust on all sides. Issuing Banks, Payment Platforms, Mobile Network Operators and Retailers all are eyeing each other warily afraid that they will lose control of their existing revenues and find themselves strangers to their customers. They are jockeying to control what everyone suspects is going to be the next multi-billion dollar industry, and carve a sustainable business out of transaction fees, interactive advertising, and couponing. The stakes are high, and there is more than a little fear as a motivator. Customers can sense this uncertainty, and they haven’t seen compelling and easy-to-use solutions that entice them to take the time to learn how to pay with their phones.
All of that is about to change if this article in the International Business Times is on target, and the next amazing thing from Apple is iWallet, a feature of the NFC-enabled iPhone 5. (Or perhaps just iPhone if the iPad naming choice is an indicator.) While Apple’s designers are lauded and sometimes even worshipped, you have to have some empathy for the difficulty they must face in coming up with the next incredible thing. Mobile payments has always been seen as cutting edge and futuristic, and frankly Apple is running out of things that the iPhone can reinvent; it’s a logical choice. So, according to the article, we are going to see iWallets that can use PIN authorization, allow for parental controls, offer the opportunity to flag fraudulent transactions and more.
None of these things are new in the mobile wallet world, but all of them coming from Apple are capable of being game changers for several reasons. First, there is the hype. Everything from Apple is given far more attention than anything from anyone else. Steve Jobs set up a hype positive feedback loop that shows no sign of slowing down. Next, there is the enviable iPhone upgrade cycle, as people who own Apple items often feel compelled to upgrade to the latest and greatest version, and often pay a premium to do so ensuring a rapid influx of NFC handsets. Finally, there is the massive amount of iTunes subscribers, many of whom could have access to some portion of the iWallet functionality with or without NFC-enabled devices. Add all of these together, and you have a cyclone of activity around mobile payments and Apple.
For Apple’s competitors in the mobile space, the attention to mobile payments will be a bit of a mixed blessing. The industry needs a jumpstart, particularly at the retail level so that customers see substantial growth in the places where they can pay using their phones. Apple usually announces commercial partners when they launch new initiatives, and it’s a safe bet that a number of high profile retailers would be very tempted to become early adopters of the Apple effort. That’s good if the retailers are open to having multiple offerings from other mobile payment providers.
The flip side of course is that Apple may suck all of the oxygen out of the mobile payments space for everyone who carries an Apple phone, which is an awful lot of people. It might make Google pick up their game a bit after some initial missteps and as I finish writing this, I just saw an article that Google is evaluating sharing revenues with the telcos. So they are actively tweaking their offer.
The group it brings the most pressure on would be Isis, as they could find themselves dwarfed in their 2012 launch by a similar one from Apple. Many of Isis target customers are already Apple customers, and efforts to tap those customers could prove impossible if Apple manages to secure the NFC secure element for their purposes alone. Efforts on the drawing board from retailers such as Target and Walmart could also find themselves boxed out by Apple.
So if, and it’s still a big "if ," Apple launches iWallet it will be a big boost for mobile payments, trouble for weak competitors, but ultimately allow for growth beyond coffee houses and limited trials. I for one will look forward to that.
Greg Coogan is the Field Marketing Lead for Morpho Cards USA, and premier provider of secure identity solutions. He has been working on mobile payments since 2005.