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Comment: Apple’s mobile payment plans and its vision for retail

Wednesday May 16th 2012

Two companies that are set to play a major role in m-payments, PayPal and Apple, are reluctant to embrace NFC, although for very different reasons, argues Pablo Saez Gil of ResearchFarm.

While eBay is mainly worried about the influence of card operators and their fees, Apple’s reasons for bypassing NFC are to be found in the company’s strategy.

While hugely successful in online payments, PayPal is still trying to find its place in the off-line world. The Ebay subsidiary is a leading advocate of digital wallets and the cloud as opposed to mobile wallets and tap-and-go payments. Unlike Visa and MasterCard, which are both pushing mobile wallets and proximity payments while simultaneously rolling out digital wallet initiatives V.me and MasterCard PayPass, PayPal is only focused on cloud-based payments and does not endorse contactless technology, fearing that a success of NFC may help to perpetuate card operators’ dominance in the payments industry.

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The other major mobile payments player, Apple, has patented dozens of possible NFC implementations on its devices as well as future apps such as iWallet or iTravel. But despite the patents, the company has not introduced NFC anywhere. In spring the company told British mobile carriers that it would not support NFC in the near future due to the lack of standards.

Apple’s entire business model is based on over-delivering and pushing the boundaries. While the company does not get it right all of the time, the relentless focus on quality has hugely contributed to generating the loyalty of its followers and the cult around the brand. As part of this overall strategy, Apple only tends to embrace technology solutions that it perceives as working seamlessly and without glitches, which often leads the company to adopt proprietary solutions instead of industry standards. Apple’s lack of support for NFC looks like just another case in point. We believe the company is about to ignore NFC entirely, due to the current complexity behind NFC business models and the ongoing battle between mobile and digital wallets. Not least due to the success of the iPhones, Apple’s ‘boycott’ of NFC has a huge impact on other handset manufacturers, card operators and companies such as Google and their NFC payment strategies. Many of these players are now trying to update their NFC mobile wallets into digital, cloud based wallets.

Moreover Apple might have already found another contactless technology, whose capabilities leapfrog NFC. Last year Apple silently upgraded its Bluetooth offering in its entire range to a new subset: Bluetooth Low Energy. This allows low-consumption chips to act passively in the form of stickers in a similar fashion to NFC tags and devices can automatically and passively connect and transfer information seamlessly. The technology also enables long distance connections between devices of up to 50m. This feature will eventually enable payments on the go, without the need of fixed POS and traditional checkouts.

The Apple stores, incorporating mobile features such as EasyPay and Personal Pickup, and a highly mobile sales force, point to a future, in which the role of traditional checkouts is uncertain. Apple’s patents and stores suggest that the company envisages a world in which POS terminals are no longer fixed at the till, but are as mobile as the shop assistants and the customers. Unlike NFC that requires “tap-and-go” at tills, Bluetooth low energy fits perfectly with this vision of retail.

Since mid 2011 Bluetooth Low Energy has been available on every single device sold by the company, both on iOS devices and Macs. This means there are currently millions of shoppers who could easily be encouraged by Apple to make mobile payments, when the company launches its iWallet offering, indeed we believe that Bluetooth-triggered payments could surprise many companies and observers.

Furthermore such a mobile payment strategy would hugely increase global demand from retailers for Macs, iPads and iPods in stores to be used by staff to process mobile payments from shoppers. Leaving aside Apple’s plans for mobile payments, which are covered in our recently published “The Future of Mobile Payments” report, we think Apple is hoping for even more from app developers, cloud payments and its ecosystem. The company is encouraging dongle makers such as Square or iZettle, whose products can be added to iOS devices to accept card payments on the go. Apple’s filed patents suggest that the company thinks shop assistants and bartenders will in future manage transactions from Apple iOS devices and Macs, instead of traditional POS terminals.

While we think that Apple is serious about mobile payments, in our view Apple’s ambitions in the payments space are somewhat secondary to the company’s core business: selling iOS devices and Macs. Cloud-based payment platforms, be they digital wallets or retailers’ mobile apps, perfectly fit into Apple’s strategy to sell Macs, iPads, iPhones or iPods. We think the company sees the mobile payment revolution as a way to increase its presence in the retail space at both ends: with shoppers and retailers.
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