Apple reportedly playing waiting game with mobile-payment initiative

Posted:
in General Discussion edited January 2014
As a growing number of handset makers incorporate mobile payment systems in their smartphones a new report details why Apple has been seemingly reticent to enter the market and says that company executives have chosen the "go-slow" approach instead of rushing headlong into the sector.

A report from The Wall Street Journal explains that Apple is deliberately holding back in the mobile payment arena as a result of "deep discussions" last year.

At WWDC in June Apple announced the new Passport app which is seen as the iPhone maker's foray into the world of mobile payments and will be included in iOS 6 later this year. The system is far removed from offerings like Google Wallet's near-field communications solution and Microsoft's upcoming system that stores credit card and "other mobile-payment" information that can be accessed directly by a merchant.

While competitors are jumping head-first into mobile payments, Apple looks to be merely testing the waters with Passbook, an app that only stores digital versions of loyalty cards, boarding passes, tickets and the like. The app doesn't have credit-card information storage, nor is the next-generation iPhone expected to sport NFC but that is apparently the point.

Apple senior vice president of worldwide marketing Phil Schiller said that other digital-wallet services are "all fighting over their piece of the pie, and we aren't doing that."

Passbook App
Apple's upcoming Passbook app will be included in iOS 6. | Source: Apple


Piper Jaffray analyst Gene Munster contends that Apple is strategically waiting until the market is no longer nascent and can learn from the competition's mistakes. "Apple is always a comfortable number two," Munster said. "They let their competitors do their market research for them."

Apple is actively studying its options, however, and sources close to the matter said iPhone software chief Scott Forstall was interested in the idea of a comprehensive "wallet app" as early as last year. Forstall reportedly put a team together to work out the feasibility of offering direct payment functionality but the idea was scrapped on account of its complexity and the possibility that the company would in some ways need to become a bank.

Instead of a full-fledged "wallet app" engineers decided on the Passbook software which could allow the company to be cut-in on each payment made through the service, a well-worn strategy already implemented in iTunes. This idea too was pared down during an executive review of the overall system in 2012, said a source briefed on the meeting.

Chief Financial Officer Peter Oppenheimer reportedly had concerns about information security while Schiller was worried that poor customer service from merchants might reflect badly on Apple. Thus the ultimate app agreed upon was limited to inessential financial assets.

The story isn't over for Apple's "wallet app," however, as it is unlikely the company can ignore the mobile-payment market for long. According to research firm Gartner, the sector is expected to grow from $172 billion worldwide in 2012 to over $600 billion by 2016.
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Comments

  • Reply 1 of 53
    cvaldes1831cvaldes1831 Posts: 1,832member


    Not surprising.


     


    Apple has typically been relatively conservative in picking cellular technologies for its handsets, typically waiting for a given cellular network technology to be well deployed on a worldwide basis before implementing it in their handset. In the last iteration, the iPhone 4S stuck to well-proven HSPA+ technology rather than try to implement LTE (which would have been problematic concerning battery life issues).


     


    For something like NFC contactless payments, there really needs to be a well-implemented worldwide standard before it makes sense to roll out on a handset that is marketed worldwide.


     


    Today, there are too many corporations competing to push their own proprietary NFC "solutions". No one can apparently recreate what happened in Japan and South Korea, so consumers are stuck on the sidelines watching a parade of NFC peddlers walk by.


     


    American Express has sunk millions into failed smart card initiatives including their long-defunct smart-chip equipped cards (I had one of those Blue Readers) and the more recently cancelled NFC-chipped cards. My old American Express Blue card had the NFC chip, the most recently issued card does not. Both of my Chase cards have the PayPass NFC chip, and I've seen plenty of PayPass card terminals in stores, etc., but I've never seen anyone use one.

  • Reply 2 of 53
    solipsismxsolipsismx Posts: 19,566member
    Not surprising.

    Apple has typically been relatively conservative in picking cellular technologies for its handsets, typically waiting for a given cellular network technology to be well deployed on a worldwide basis before implementing it in their handset. In the last iteration, the iPhone 4S stuck to well-proven HSPA+ technology rather than try to implement LTE (which would have been problematic concerning battery life issues).

    For something like NFC contactless payments, there really needs to be a well-implemented worldwide standard before it makes sense to roll out on a handset that is marketed worldwide.

    Today, there are too many corporations competing to push their own proprietary NFC "solutions". No one can apparently recreate what happened in Japan and South Korea, so consumers are stuck on the sidelines watching a parade of NFC peddlers walk by.

    American Express has sunk millions into failed smart card initiatives including their long-defunct smart-chip equipped cards (I had one of those Blue Readers) and the more recently cancelled NFC-chipped cards. My old American Express Blue card had the NFC chip, the most recently issued card does not. Both of my Chase cards have the PayPass NFC chip, and I've seen plenty of PayPass card terminals in stores, etc., but I've never seen anyone use one.

    MasterCard already stated that a company like Apple needs to be behind the shift to NFC. I wonder if that is some foreshadowing. I can see Apple using the hundreds of millions of CCs on file to use as a middle man for all these payments through MC, Visa, and AmEx.

    They don't have to make a major profit on the transactions. It can be like their other services where it's just a way to sell more HW so their goal is to pretty much break even. That makes me wonder if something like 0.025% per transaction would be more than sufficient to cover their expenses... and then some.

    For those that have used their Apple Store app to scan and buy a product without assistance from an Apple Store employee you already know they allow for atypical product sales from your phone via the CC on file with your iTS account. This is alright but it's only part of the process, like with PassPort. NFC (or something like it) is the only way to move this to the next level of usability and security.

    As for first being well-implemented, that's a chicken and egg problem. How did we ever get credit cards, ATM and debit cards in circulation? They are all before my time but i assume it was like most other culture changing conveniences where you have the old and new way being used concurrently until the new way is so popular, well vetted and ubiquitous (for a given area) that the old way just gets forgotten or is kept as a "just in case" backup. Even now we still use cash even though it's a very insecure method of transferring funds.


    So NFC coming this year to the 2012 iPhone (can't call it the 6th release of the iPhone without feeling Melgross's wrath).
  • Reply 3 of 53
    shaun, ukshaun, uk Posts: 1,050member


    Go slow? More like going nowhere. It seems like we've been waiting forever for NFC technology to go mainstream. They've been doing this in Japan for many years.

  • Reply 4 of 53
    uhrgenauuhrgenau Posts: 9member


    I hope that Apple comes up with a more intelligent solution than the current crop of NFC offerings. What I see today in payment technology is actually retrograde. It may be more secure to use a chipped CC but it is also slower and less convenient than the older swipe and sign. The thought of an NFC system that requires me to take my iPhone out of my pocket, out of its protective case and then tap it on a terminal after having stood in line to get there does not strike me as progress. A recent article suggested that Apple would implement payment via Bluetooth which would allow me to pay from anywhere in the store without approaching a terminal made a lot more sense to me.

  • Reply 5 of 53
    solipsismxsolipsismx Posts: 19,566member
    shaun, uk wrote: »
    Go slow? More like going nowhere. It seems like we've been waiting forever for NFC technology to go mainstream. They've been doing this in Japan for many years.

    That means nothing on so many levels.
  • Reply 6 of 53
    shaun, ukshaun, uk Posts: 1,050member

    Quote:

    Originally Posted by SolipsismX View Post





    That means nothing on so many levels.


     


    How so?

  • Reply 7 of 53
    genovellegenovelle Posts: 701member

    Quote:

    Originally Posted by cvaldes1831 View Post


     Both of my Chase cards have the PayPass NFC chip, and I've seen plenty of PayPass card terminals in stores, etc., but I've never seen anyone use one.



    I use mine everyday.

  • Reply 8 of 53
    solipsismxsolipsismx Posts: 19,566member
    genovelle wrote: »
    I use mine everyday.

    Is that NFC? I thought those were RFId sans NFC.
  • Reply 9 of 53
    shaun, ukshaun, uk Posts: 1,050member

    Quote:

    Originally Posted by uhrgenau View Post


    A recent article suggested that Apple would implement payment via Bluetooth which would allow me to pay from anywhere in the store without approaching a terminal made a lot more sense to me.



     


    Not sure how that would work. You would still need to go to a recognisable "payment point" in most stores to pack the goods and pay. I know you can do something like this in the AppleStore but you still have to find a sales rep, ask them to go get your goods and put them in a bag before you walk out. I don't see how that's much different from simply going the payment point.

  • Reply 10 of 53
    mike54mike54 Posts: 183member


    Apple better not wait too long. Do they want to be a leader or follower? Microsoft phones will have NFC later this year. However, I believe it should a world standard.

  • Reply 11 of 53
    shaun, uk wrote: »
    Go slow? More like going nowhere. It seems like we've been waiting forever for NFC technology to go mainstream. They've been doing this in Japan for many years.

    This is one of the biggest misconceptions and claims about Japan. Don't know your experiences, but I've been to Japan twice and in my travels I've yet to see anyone using this to pay for anything. All my friends and people I've seen in stores all reach into their wallet/purse just like we do. Not saying no one uses it, but I've been to a handful of cities there and no one I've seen does this. But their train system is truly amazing, food is great and the women are beautiful. :)
  • Reply 12 of 53
    cvaldes1831cvaldes1831 Posts: 1,832member

    Quote:

    Originally Posted by mike54 View Post


    Apple better not wait too long. Do they want to be a leader or follower? Microsoft phones will have NFC later this year. However, I believe it should a world standard.



     


    Again, the problem is that there is no agreed-upon standard amongst merchants, payment processors, etc. unless you live in certain southeast Asian countries (Japan and South Korea are notable).


     


    The technology isn't an issue, it's an implementation or acceptance problem. In the same way, HD DVD died because the market acceptance went to Blu-ray. Same with Beta versus VHS. GSM versus Nextel's iDEN service.


     


    Each of the major credit card companies has their own wireless payment technology: Mastercard PayPass, Visa payWave, American Express ExpressPay, etc.


     


    Microsoft will be implementing some kind of NFC, but there's no guarantee that whatever horse they are backing will win the race. Remember that Microsoft bet on HD DVD, the industry alliance that ultimately lost.

  • Reply 13 of 53
    shaun, ukshaun, uk Posts: 1,050member

    Quote:

    Originally Posted by mesomorphicman View Post





    This is one of the biggest misconceptions and claims about Japan. Don't know your experiences, but I've been to Japan twice and in my travels I've yet to see anyone using this to pay for anything. All my friends and people I've seen in stores all reach into their wallet/purse just like we do. Not saying no one uses it, bit I've been to a handful of cities there and no one I've seen does this. But their train system is truly amazing, food is great and the women are beautiful. :-)


     


    Interesting. I thought it was more widespread than that simply from what I've read over the years but as I've never been to Japan I don't honestly know. Thanks for the insight. You learn something new every day. I would love to go to Japan one day. A whole department store with just tech goods - how good must that be. Can't comment on the food and trains but I agree with you about the beautiful women. 

  • Reply 14 of 53
    solipsismxsolipsismx Posts: 19,566member
    shaun, uk wrote: »
    How so?

    I have to be brief but there should be plenty of keywords to google. Japan is a much smaller country than the US so certain technologies will be tried and adopted faster in certain cultural structures. 10 to 1 population density can do that. What you are calling NFC is Japan's FeliCa which is more advanced than RFID and has a direct lineage of modern, ratified NFC but it's not the same thing as NFC-A or NFC-B. You might best call modern NFC the lovechild of RFID and FeliCa. Finally, it's been less than a decade since FeliCa launched and much less than that since it really caught on in certain areas. It's certainly not as common or more common than swiping a card still is.
  • Reply 15 of 53
    gtrgtr Posts: 3,231member

    Quote:

    Originally Posted by mike54 View Post


    Apple better not wait too long. Do they want to be a leader or follower? Microsoft phones will have NFC later this year. However, I believe it should a world standard.



     


    Apple are generally not leaders anyway, and that's a good thing when it comes to doing things properly.


     


    They didn't have the first mobile phone, or tablet, and look how those markets have turned out for them.


     


    If MIcrosoft gets in first, then they'll just help to bring in a standard. That's good, not bad, for Apple.

  • Reply 16 of 53
    suddenly newtonsuddenly newton Posts: 13,707member

    Quote:

    Originally Posted by mike54 View Post


    Apple better not wait too long. Do they want to be a leader or follower? Microsoft phones will have NFC later this year. However, I believe it should a world standard.



     


    Oh please. Microsoft? The company that made a name for itself rushing version 1.0 to market and takes 3 versions to get anything right?

  • Reply 17 of 53
    bushman4bushman4 Posts: 789member


    Apple is apparently  waiting for something to go into NFC, I have no idea what Apple is waiting for, but doing it right is more important. So lets give Apple credibility on waiting for the time to be right,

  • Reply 18 of 53
    entropysentropys Posts: 995member


    The passbook app in the iOS 6 beta tells you all you need to know.  How hard would it be to add master card,visa, paypal etc. to it?  Not hard at all.  But these apps will not be available until the RFID chip is in the next iphone, and Apple certainly won't be letting the cat of the bag before then.  

  • Reply 19 of 53
    gtrgtr Posts: 3,231member

    Quote:

    Originally Posted by Suddenly Newton View Post


     


    Oh please. Microsoft? The company that made a name for itself rushing version 1.0 to market and takes 3 versions to get anything right?



     


    They only take three versions because anything needs to pass through the three layers of developers...


     


    steve-balmer-developers-developers-developers.jpg

  • Reply 20 of 53
    ericthehalfbeeericthehalfbee Posts: 3,390member


    I think Apple wants to turn things upside down. Literally.


     


    Instead of having a POS terminal in the store that gets CC data from your smartphone and processes the payments, I think Apple wants to turn your iPhone into the POS terminal itself.


     


    Right now the company providing the POS terminal makes a processing fee on every transaction. They also handle the details about transferring funds to the merchant bank account from the customers credit card (or debit card).


     


    I think Apple wants to bypass the POS terminal provider entirely and do all the payment processing themselves, including getting a fee on each transaction. Apple would use your CC's on file in iTunes to process payments, or your iTunes account balance for those who use gift cards. There would be no CC information stored on your iPhone.


     


    I can't see Apple working with an existing processor (like Moneris) and trying to negotiate who gets what percentage of the processing fees. Apple isn't going to want to do this for free and Moneris isn't going to want to lower their fees simply because Apple wants to "join the game".

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