WSJ: Apple Laying Groundwork for Mobile Payments Platform (Jan. 27, 2014)
Apple Inc. is making plans to launch a mobile wallet service for its iPhone, iPad and iTunes users, according to a Jan. 24 Wall Street Journal report. Eddy Cue, chief of the iTunes and Apple Store and online services, is leading the effort with Jennifer Bailey, one of Apple’s top retail execs, according to the report, which cited unidentified sources close to the situation.
The latest news suggests the pieces are falling into place for Apple to eventually become a payments option in the general marketplace, Rick Oglesby, a senior analyst with Aite Group, tells Paybefore. But he cautions that it likely will take a year or two before such a service from Apple becomes widely available, because “on the merchant side the pieces aren’t there yet.” But momentum is certainly building toward turning Apple devices into mobile payment tools. Apple’s recent moves to introduce iBeacons in stores and Airdrop are key components in its mobile payments strategy, Oglesby notes. Apple in recent years has filed a steady stream of payments-related patents, and the company described one of its latest patents as a “method to send payment data through various air interfaces without compromising user data.” Though Apple has not yet introduced NFC to its handsets, last June the company added a fingerprint-based security feature to the iPhone, a smartphone industry first.
If Apple creates a broad digital wallet, it will join a growing number of providers seeking to streamline the payments process and reduce steps so consumers need not constantly input personal account data. Such a product would likely provide a “significant threat” to existing digital wallets, including those from PayPal, Google and Isis, a team of equity analysts with New York-based Keefe, Bruyette & Woods, said Jan. 26 in a report analyzing Apple’s moves. Apple has some big advantages, including roughly 575 million enrolled iTunes users globally, and a 40 percent share of the U.S. smartphone market, the analysts said. But introducing a new mobile wallet service and getting individual merchant participation is “a very difficult task,” the analysts suggest.
It is early to speculate on what direction Apple may go in developing a mobile payments service, but partnerships could play a key role, according to Oglesby. “If Apple is able to partner up with the likes of [the merchant-led mobile wallet venture] MCX, the payment networks or a major financial institution, it could accelerate things,” he says.