In the aftermath of the latest iPhone launch it’s easy to say that Apple is passing on mobile payments yet again, while NFC remains highly conspicuous by its absence.
In the aftermath of the latest iPhone launch it’s easy to say that Apple is passing on mobile payments yet again, while NFC remains highly conspicuous by its absence. However with the launch of fingerprinting functionality TouchID, in conjunction with Passbook, and the launch of iBeacon Apple is the laying the groundwork for a future m-payments behemoth.
If Apple did decide to turn iTunes into a full-fledged open loop mobile payments platform, with the number of existing accounts (Apple is among the world largest holders of payment card data) Apple would become a larger payments player than American Express and PayPal combined virtually overnight.
Nothing Apple has done to date is explicitly aimed at launching a major mobile payments platform but the steady stream of developments suggests the pieces are now strategically being laid into place. Although remaining a relatively little used feature Passbook already provides a consumer facing mobile wallet.
With its less heralded but potentially more critical iBeacon functionality in iOS7, Apple is now launching a scalable means for connecting the handset to the POS. iBeacon unlike NFC has the potential to shake up retail payments significantly by breaking the necessity for a payment directly at the register and introduce new types of consumer experience. TouchID meanwhile provides a means for consumers to authenticate payments quickly, without the need for pins and passwords away from the standard POS at the front of the store model.
The greatest strength of TouchID from a proximity payment perspective however comes mainly from a psychological point of view more than anything else, as biometrics seem more secure to consumer, merchants and likely many banks as well. That at least reassures some of the public scepticism on the security of mobile payments. Although fears of finger chopping muggers are likely to increase, even if fingers must be live to activate TouchID.
Where TouchID gets more interesting is with remote mobile payments, mainly due to the added simplicity of one touch sign in and payments in a single tap. Apple has already stated it will not share biometric data with anyone and with good reason.
However with Apple acting as a middleman to verify payment authentication, TouchID would likely prove of huge interest to merchants, particularly in the growing field of mobile commerce through a handset. Using TouchID the shopping experience become slick and easy without the need for complex passwords or fumbling with payment details on a small screen. With Apple’s massive iTunes customer base, many merchants will be salivating at the chance of tapping into that.
Many of the major payment companies are now focusing on an online remote wallet presence first, and then shifting that to the real world proximity space (V.me and Masterpass being the prime examples). It’s just conjecture at this point, but Apple could in theory roll out one touch payments pretty easily first remotely, and then in real world proximity transactions. Unlike the telcos trying to muscle their way into NFC, Apple with its control over biometric credentials would be well placed as a focal point in the transaction flow value chain and could reap significant profit from this. It could alternatively achieve the same through some well positioned partnerships with existing payment players
Less directly, biometrics is something the payments industry has been dabbling with for some time, but it generally hasn’t gone that far yet mainly due to the high costs and complexity of enrolling people, not to mention the potentially negative reaction from many consumers. Would consumers want to receive a letter from their bank telling them to come in branch to be fingerprinted?
The last outbreak of swine flu and Sars before that had a negative impact on biometrics as people were concerned with the germ factor of the scanners even though chip and pin pads all need to be touched as well, (psychology goes a long way in payments). Even though it’s not the first biometric fingerprint enabled device, the payments community will likely begin relooking at the wider applications of biometrics in payments, so expect to see more fingerprint enabled payments in the near term.
- Gilles Ubaghs is a Senior Analyst in the Financial Services Technology team at Ovum, focusing on mobile payment systems and services, primarily in developed markets.