Beginning With An iWallet, Apple Could Revolutionize Personal Banking

Beginning With An iWallet, Apple Could Revolutionize Personal Banking

There’s been a lot of talk over the past year or so about mobile payment systems and the concept of an iWallet. One of the challenges to any digital wallet concept is that it needs several components, most of which are provided by different companies and governed by different regulations. At a minimum, those components need to include on-device hardware, a mobile app or OS that can manage the transaction, a banking or credit card system that actually transfers money from your account to a retailer, support by major POS and cash register systems, and some mechanism for your phone to securely check-in with your selected account(s) to ensure money is available for purchases.

That’s a tall order and a lot of cooperation is needed when you have a different company providing each of those required functions. One way to simplify the process is to have one company deliver all or most of those functions on its own. There are few companies in the world that can pull all those capabilities together. One of them is Apple.

Apple is uniquely positioned when it comes to mobile payments. It designs and manufactures the iPhone, it creates and updates iOS, it can deliver any app that might be required, it already has an electronic payment system that it uses across its various online stores (iTunes, iBooks, and the Mac and iOS App Stores), and the company has been reinventing retail and payment technologies for over a decade in its stores around the world. The only things Apple is really lacking is support from merchant point of sale systems and broader access to your finances to facilitate choosing an account for payments.

That brings us to an important question: Do we want to provide Apple with that much information? Put a slightly different way, are we comfortable with Apple essentially acting as our bank?

The idea of Apple as a bank isn’t as far-fetched as it may sound. Anyone with a PayPal account and PayPal’s iPhone app probably knows that, in addition to transferring money to your PayPal account from your bank, you can deposit checks directly into your PayPal account by snapping photos of the front and back of the check. Similarly, PayPal is expanding into retail outlets and allowing you to pay by entering your mobile phone number and a pin code. Even before PayPal launched those features, it had already established its own debit and credit cards. Those are all common features that traditionally have been handled by banks.

Apple’s payment infrastructure has some of those banking features already, most notably the ability to link to a credit/debit card (or a PayPal account) and the ability to facilitate account funding in the form of gift cards. Funding an account with gift cards isn’t the same thing as depositing money, primarily because you can’t convert them back to cash, but conceptually it’s pretty similar.

A post on the IP Carrier blog notes that a survey indicated American consumers are very receptive to the iWallet concept and don’t have qualms about trusting non-bank companies with traditional banking functions. It also notes that mobile carriers and service providers in Africa frequently act as electronic payment and money transfer agents, making them de facto banking operations to some extent.

Closer to home, non-bank companies already handle some banking functions. GreenDot’s MoneyPak system enables users to place money into an electronic account for bill paying and debit card purchases. Walmart has introduced several key banking features in Walmat Money Centers in its store and online. Those features include check cashing, bill payment, money orders, and debit cards – all things traditionally done by banks.

Using those models and Apple’s existing infrastructure, the company could easily expand to offer some full-on banking capabilities like check deposits, multiple accounts for payments, and bill paying. Apple could also partner with a more traditional finance company to establish that functionality. The big question is whether or not we’ll trust Apple enough to play such a major role in our lives.

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  • ammoniteboy

    Well Hong Kong has had its Octopus Card system, http://goo.gl/4uqKO,  for a while and that seams to work perfectly fine.  Its essentially the same idea. I like it a lot and would love to see the same sort of touch system make its way to the States.  But if it requires purchasing a five hundred dollar phone its an instant fail. I much prefer having a cheep plastic card that can be loaned to friends and family when needed. I have an Octopus card case for my iPhone and that seams to be the happy medium.

    For those who aren’t familiar with the system it is a simple RDF card that allows you to deposit money on it and make purchases when it comes in contact with a payment plate.  It is not connected to your bank account and so if its stollen or lost you only risk loosing the amount you keep on it. The touch plates apparently can be installed on anything and simplify small transaction greatly.  Its very handy! No more loose change to sift through once you have one.  Its brilliant for parking lots, tolls, vending machines, subway tickets, snacks, coffee shops etc.  Since its an RDF people also use them for building access and other types of spacial access. Most importantly it doesn’t try to compete with credit cards, it just fills in the gap for all those transactions that are too small for the more secure cards to make.
  • Steffen Jobbs

    I don’t know what’s taking Apple so long to get an iWallet established.  Apple certainly can afford the infrastructure and has enough money to become its own bank.  I guess it’s waiting for another company to come along and steal its thunder.  Apple needs to become a bank and take away some of the company’s dependency on hardware alone.  Doing so might definitely help Apple’s extremely conservative valuation by Wall Street.  The iWallet seems like an infinitely better idea than those stupid rumors about some 42″ to 50″ AppleTV.  The rumored AppleTV is just more hardware for Apple to be concerned with updating.  Banking with Apple would definitely be the way to go.  Both MasterCard and Visa have P/Es of around 27 which is almost double what Apple has now.

  • Richard Bagdonas

    The key thing is going to be integrating with the existing POS for transactions. SubtleData (http://www.subtledata.com) has been the leader in making this happen.  Apple should look at it for getting their e-Wallet into the mainstream.

  • technochick
    Apple has zero interest in being a cable company, a cell service company, an ISP or even a bank. Too much ‘bag of hurt’ with all rules and requirements and systems they would have to set up and maintain. Why go through any of that when there are other companies that are already doing it and have been for ages. Steve Jobs and Tim Cook both have said that Apple only does something when they can really innovate and improve on the status quo and they are fine with leaving many things to the folks that already have it sorted out. 
    the haters already like to call Apple ‘big brother’ but they aren’t. YET. if they get into trying to be everything then they will become just that. And they will stretch themselves so thin that the ‘baby’ updates we get now will see like major overhauls compared to what we’ll start getting

    ps. it’s worth noting that the survey mentioned in the article was of 605 people. No information about how they were selected etc. That’s so far from scientifically or statistically sound that it’s basically a joke.

  • technochick

    Well Hong Kong has had its Octopus Card system, http://goo.gl/4uqKO,  for a while and that seams to work perfectly fine.  Its essentially the same idea. I like it a lot and would love to see the same sort of touch system make its way to the States.  But if it requires purchasing a five hundred dollar phone its an instant fail. I much prefer having a cheep plastic card that can be loaned to friends and family when needed. I have an Octopus card case for my iPhone and that seams to be the happy medium.

    We have systems like that here in the US. Pretty much every major cities has a metro system that uses a ‘tap card’ and so on. 

    The only difference is that these cards aren’t universal. My LA Metro card doesn’t work in NYC. Businesses that use their own ‘tap system’ have their own cards. 
    Where Apple could work within this type of system would be if they had some kind of flexible chip that could ‘tap’ the right signal based on what you select in an app. So you can program the chip this morning to be your metro card, then your starbucks card, etc. Saving you from having to carry around a stack of cards since you have an iPhone (option, not requirement). many of these stores have reloadable cards anyway so it’s not touching your actual bank account. I already do this in a way with Starbucks. I have the money loaded on my card and then I use their app to put up a QR that their system reads and debits my Starbucks card. 
  • Andy Murdock

    OK Cult of Mac, what the hell is going on with your site. There is an extremely annoying Verizon ad that keeps popping up when I move my mouse around your page. This makes it impossible to read your postings. Keep it up and we’ll go elsewhere.

  • ApplePr0n

    I have mixed thoughts on this. I think it’s kinda cool, but also a little unnecesary. Plus, with very little POS machines even supported PayWave, how long will it actually take before something like an iWallet takes place in the real world?

About the author

Ryan FaasRyan Faas is a technology journalist and consultant living in upstate New York who has written extensively about Apple, business and enterprise IT, and the mobile industry. In addition to writing for Cult of Mac, he is a contributor to Computerworld, InformIT, and Peachpit Press. In a previous existence he was a healthcare IT director as well as a systems and network administrator. Follow Ryan on Twitter and Google +

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