upcoming IOS 6 operating system for Apple’s vaunted array of mobile devices, takes only a tentative step into the world of mobile wallets. It may seem surprising that Apple is doing so little to grab a potentially lucrative stream of revenue, but given the in-fighing within the e-wallet sector, this approach seems designed to ease into the market and avoid freaking out mobile carriers.Passbook, touted as part of the
E-wallets, or mobile wallets, offer convenience to mobile device users. Using on-screen barcodes (static or dynamic) or near-field communications (NFC) embedded in a properly equipped device, smartphone users can simply scan or tap their devices near a merchant’s reader to instantly purchase goods and services. E-wallets converge payment systems from cash, credit or debit to a single device that can also track and update a user’s finances on the fly.
Who Makes Money from E-Wallets?
Most of the controversy about mobile wallets centers, naturally, around money. Anyone who offers an e-wallet service for mobile devices is going to get a cut of an electronic transaction - much like credit card companies take a percentage of every sale made using their cards.
This is a big part of the reason why Google set up its Google Wallet service on the Android operating system in the first place. Well, that, and the chance to get a hold of some juicy customer data to feed its advertising business.
But the major U.S. cellular carriers are none too happy with Google’s plan. Already Verizon has blocked Google Wallet on its network, and now there are indications that Sprint may be planning to do the same. Instead, each carrier is opting to support its own payment service.
Steering Clear of a Political Fight
Perhaps that’s why Apple’s new Passbook service, highlighted yesterday at Apple’s Worldwide Developer Conference, is more of an e-ticket and loyalty card organizer than a true e-wallet.
Not that this won’t be handy in its own right. The new feature, which will debut along with iOS 6 this fall, collects airline boarding passes, train tickets, store loyalty cards, coupons and movie tickets. It is also location-based, using so-called geo-fencing so that if you wander near a retail outlet where you participate in a loyalty program, the appropriate card will pop up on on your iPhone’s Lock screen.
Passbook will present static barcodes that merchants will scan to conduct transactions, so any newer service that uses dynamic barcodes will be beyond its reach. (Dynamic barcodes don’t require scanners, using animations that merchants read and validate on their own. Masabi’s mTicket system used in UK railroads are one such example.)
There will be no NFC transactions in Passbook, either - Apple has yet to put NFC into in any of its mobile devices. NFC is a power drain, and Apple is famously conservative when it comes to power demands on its devices.
What Comes After Passbook?
Ultimately, Passbook should be seen for what it really is: a transitional platform Apple is using to gingerly step into the e-wallet arena. In the long run, though, given Apple’s focus on revenue from iTunes, it’s hard to believe Apple will ignore transaction revenue forever.
If and when Apple does choose to move into iPhone-based transactions, the company will enjoy some tremendous advantages, including all that iTunes and App Store experience, not to mention credit card information for hundreds of millions of customers. Banks and credit card companies may be more eager to work with Apple than the carriers and Google, too, based on consumer surveys that peg Apple users as more well-heeled and willing to spend more on goods and services than the general population.
A true mobile wallet offering from Apple would put tremendous pressure on Google’s e-wallet offering, as well as upcoming systems from Sprint and Verizon. (And in the long run, Passbook could be the beginning of an even more ambitous strategy to usurp the credit card companies. For more on this idea, see Apple's Opportunity: Disrupt the Credit Card Business.) Either way, Apple seems to be taking its time to get everything right for a too-big-to-fail effort.