If Apple Makes A Move Into Mobile Payments, It Could Not Come At A Better Time

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As Apple inches closer to its news event on September 9, there has been growing speculation that mobile payments will be a part of the action. Apple, the reports say, will add NFC technology to the iPhone 6, and it will debut a mobile wallet-style service that could include integrations with American Express, Visa and MasterCard and possibly PayPal to enable physical, in-store payments using the smartphone.

The reports of Apple finally making the mobile payments jump seem to have redoubled this year, boosted by positive payment comments from Apple CEO Tim Cook himself.

If the reports are accurate, a mobile payments service from Apple would have been a long time in the making, coming after years of speculation involving potential acquisitions; lots of patents; a steadily growing pile of consumer credit card data from its (likely over) 800 million iTunes accounts; and as a counterbalance to moves from would-be competitors.

It also could not come at a better time, considering how many other mobile payments promises have fumbled or failed, so far, to live up to the promise.

Carriers have failed to get the ball rolling fast enough. Mobile operators used to be seen as an essential lynchpin in how a mobile payments service could work. That was partly because of their position in the mobile ecosystem — holders of payment details, bank licenses, handset deals, and customer relationships. All this has combined to paint carriers as a likely source from which mobile payment services could flow. It it’s partly because telcos are always on the hunt for more services to complement their stale bread and butter of voice and text revenues. Sure, there have been some successful services in some markets, like Japan. But independent and consortium-based efforts in countries like the U.S. (such as the soon-to-rebrand Isis) and Europe (such as the many years-old Weve in the UK) have been slow to take off.

Interestingly, from what we have heard, Apple may focus on point-of-sale technology initially rather than the wider applications of mobile payments that might involve services like carrier billing. But from what we understand this is also something that Apple is continuing to focus on as well.

Startups that could have been mobile payment leaders appear to have lost their way. For a while, it looked like Square would be the standard bearer of the mobile payments space, riding into the market on the top of Apple’s iPhone. There was a lot of hope and promise around Square’s dongle-based system, a format replicated by competitors near and further afield. Initially catering to small businesses by letting them take card payments easily using smartphones and tablets, Square then started to look much more ambitious after a deal with and investment from cafe chain Starbucks, and then a number of other services subsequently developed around and beyond that basic offering. But something didn’t seem to click, it seems. Now, with a new funding round at a $6 billion valuation on the cards, it seems people are wondering if the margins on these services are just too thin, if growth has simply not come fast enough to make a decent return, and if Square’s other lines of business are going to work out longer term.

And while companies like Square and PayPal have made a lot of inroads with retailers, they are not the only ones. Apple, with its own successful chain of stores and resellers, has a lot of insight into how to build out a retail-based payments service that I suspect gives it a lot of credibility with businesses. Apple’s relationship with IBM could also potentially come into play here as well, especially in relation to integrating systems for larger retailers.

NFC has long been an object of ridicule. As Natasha once pointed out, NFC — the acryonym for near-field communication, or the technology that allows a handset to effectively be transformed into your credit card at a point of sale — actually stands for “Nobody F****** Cares.” But while the technology has long been a niche idea, it appears that we may finally be approaching some kind of critical mass: While there were only some 275 million NFC-equipped phones shipped in 2013, IHS researches predict that by 2018 that number will be 1.8 billion, representing penetration of 64%.  That kind of critical mass will see more services and acceptance come in its wake.

For a company like Apple, what’s interesting is not just the prospect of the company supporting and enabling NFC on the iPhone, but how Apple may choose to link this up with other new technology, from iBeacons for in-store alerts for shoppers, to fingerprint sensors for extra authentication, and its Passbook as a way of aggregating orders and storing receipts, linked up, of course, with Apple’s existing billing information by way of iTunes. Given that so much of this has been put in place already over the the years, the prospect is for a fully-developed product right at launch. (That is, fully developed if Apple captures users’ trust for a new, cloud-based service — something that could potentially get called into question in light of scenarios like the iCloud/celebrity photo hack.)

Like it did with the iPhone amidst a range of other existing smartphones, Apple will not the first mover in mobile payments. Just the one that brings everything together the best.