Apple may be the only major company operating the mobile space that hasn’t announced a partnership or trial related to delivering mobile payments and creating an iWallet. While it seems a forgone conclusion that Apple will eventually enter the mobile payment market, a recent statement by James Le Brocq, managing director at O2 Money (a division of the U.K. mobile carrier O2) illustrates why Apple hasn’t yet entered the that market and why that’s a good move for Apple: consumers aren’t that interested in mobile payments.
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While Apple’s taking a wait and see approach to the nascent mobile payments and digital wallet industries, PayPal seems ready to launch an all-out offensive. In addition to its existing assortment of mobile, local, and online payment systems, PayPal announced this week that it is acquiring startup card.io.
card.io currently works with a range of iOS and Android developers to help them integrate mobile credit/debit card payment capabilities into their apps without the need of additional hardware like Square’s card reader or PayPal’s Here card reader. Instead, card.io’s partners use the built-in camera of an iPhone (or other iOS or Android device) to snap a photo of a credit card. The card number and related information is extracted and passed to a payment processor to complete the transaction (manual keying in a card number is also supported as a backup).
Mobile payment technologies have an interesting and complicated relationship with local businesses. On the one hand, local mom-and-pop restaurants, shops, and services are probably the companies that you’d expect to adopt new payment technologies the slowest – particularly if those technologies require new point of sale hardware like an NFC reader. On the other hand, mobile payment systems could be poised to deliver a new wave of business to such local companies.
Making the situation more complicated is the fact that any mobile payment system (Google Wallet, PayPal in-store purchasing, or any system that Apple may be slowly developing) can’t be considered a solid winner or option unless that system strikes it big with local businesses. A system that only applies to large chains, like the in-store purchasing the PayPal rolled out to Home Depot and other retailers, can’t be considered mainstream unless it’s adopted very widely and by a significant percentage of small businesses.
Further complicating the relationship is the fact that many players in the race to create a true digital wallet are on focusing widely varying options for small and local businesses. That means that no one company is leading and no company really seems to have a consistent strategy for tapping this immense and important market.
PayPal, Amazon, and Apple are leading the mobile payment market according to IDC. The research company released the results of a business strategy study that focused on new and emerging payment technologies. The 2012 study is eighth year that IDC has conducted the survey, but it is the first year where mobile payments were a major focus.
While many efforts are underway to develop new payment technologies, many of them based around NFC, most new technologies have yet to catch on with consumers.
Overall mobile payments, however, are catching on with consumers. IDC reports that the number of individuals making mobile payments has doubled since last year’s report and that one-third (33%) of consumers have made some form of mobile payment. The data also shows that the mobile payments market is being led established players and existing technologies.
We’ve all been waiting with bated breath for Apple to take the mobile payment industry by storm and bring it to the mass consumer market. For years, there have been whispers that Apple is working on its own approach to reinventing mobile payments, including the possibility of a NFC-equipped iPhone. When Apple unveiled Passbook in iOS 6 last month, the company announced its first real foray into mobile payments by partnering with select companies for handling virtual goods like coupons and airline tickets.
According to a new report on The Wall Street Journal, Apple’s Passbook is only a shadow of things to come. The company is “deliberately” working on its own mobile payment system, and while the rest of its competitors scramble to test the waters, Apple is sitting back and developing the right strategy.
Are mobile payments safe? That was a question that the House Financial Services Subcommittee on Financial Institutions and Consumer Credit posed to various finance officials earlier today. The subcommittee didn’t get a particularly clear answer.
According to written testimony provided by Stephanie Martin, associate general counsel for the Federal Reserve Board of Governors, defining what protections apply to mobile payment systems is complicated by the fact that many businesses involved in the transfer of money through mobile devices aren’t banks. Companies involved in mobile payment systems that don’t meet the established definition of providing banking services aren’t subject to certain scrutiny, regulation, or consumer protection laws.
Read enough articles about NFC and its potential for mobile payments and you’ll find yourself thinking the technology is the inevitable mobile payment platform. Every major mobile platform except iOS already includes or will include support for NFC-enabled devices. There are lots of partnerships being announced between key players like device manufacturers, carriers, and banking or credit card companies. It also just seems to make sense that this is the future.
Until you look up from all the stories about what NFC and look at what’s really happening in the world. You don’t see much evidence of NFC payment systems in everyday life. NFC isn’t yet emerging into mainstream commerce, but there is ample evidence that mobile payments are taking off without it. Those options becoming mainstream are decidedly low tech by comparison, but that’s precisely why they’re succeeding.
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.
It looks like Square has yet another competitor in the mobile payments arena. Global payment leader VeriFone has announced SAIL, a credit card reader much like Square’s, that will attach to a number of mobile devices. While VeriFone may have a little catching up to do, they have the advantage of an extensive network with a commanding percentage of retail transactions passing through their service.
NFC isn’t a new technology. Android and BlackBerry phones with NFC capabilities have been available for a while now and various companies have started looking at implementing NFC as a mobile payment or digital wallet solution. Google Wallet being the most well-known while MasterCard’s new PayPass Wallet Services, which the company announced on Monday is the newest and potentially broadest in scope
Apple, however, hasn’t shown much interest in adding NFC to the iPhone. The lack of NFC hasn’t kept mobile payment options off the iPhone – as we’ve recently reported T.G.I. Fridays and Tabbedout, Boston’s light rail commuter service, and AmTrak have all moved to offer mobile payments using the Starbucks app/virtual card model.
A new deal between Apple and location-based deals startup Pirq, to offer daily food and drink deals to the company’s employees in silicon valley could be a sign of Apple testing the waters with both a deals network and whether such ecommerce options make sense for iPhone users.