Apple are still the wild card in the Mobile Payments space. They have to be considering a play in this crowded space – it could be a game changer.
The Mobile Payments Fustercluck
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Tag Archives: Mobile Payments
Why talk down NFC for the iPhone 5? It’s in the trough of disillusionment
Mashable came out today with another report on “9 Most believable rumours about the iPhone 5“. Eight of them were positive new features expected on the new iPhone to be announced by Apple on September 12th, one was negative – No NFC (Near Field Communications). This quoted the Anandtech article from a couple of weeks ago that thought that the metal back of the new iPhone would stop NFC from being included as there was no room for the antenna. This, despite the fact that Apple was in a great position to become a major player in Mobile Payments using NFC.
But, as seen in my recent post here, Apple has a patent that allows the NFC antenna to be imbedded in the front Touchscreen – a more natural place for the NFC antenna anyway from a user perspective. If anyone bothers to read the comments (August 31st) on that article they would also notice that this patent has also been commented on as the reason why Apple will release NFC and it will be front facing.
Why is everyone still sticking to this (false) line, that the new iPhone will not ship with NFC? Well, I think I have the answer. In August Gartner released it’s annual Hype Cycle Report for Emerging Technologies (see picture above). The previous years Hype Cycle report had placed NFC at the peak of Inflated Expectations, but now NFC and NFC Payments had slipped down from that tipping point to the Trough of Disillusionment, with 2-5 years before it becomes generally excepted technology on the Slope of Enlightenment.
People are over the hype. NFC has been talked about for a number of years now, it had been expected in the last 2 Apple iPhones and has now been released in a number of Android phones, including the new Galaxy range from Samsung and the Blackberry from RIM. The Google Wallet has been developed for Android phones with NFC capabilities (now in Release 2). Visa and MasterCard and a number of large retailers have rolled out contactless payment terminals at Point of Sale. Everything is lining up for a major change in payments technology that will come with Mobile Payments and NFC.
NFC is the Tipping Point for Mobile Payments says Gartner, who envision a Cashless World, with every transaction an electronic one “This will provide enterprises with efficiency and traceability, and consumers with convenience and security. The technologies on the 2012 Hype Cycle that will enable parts of this scenario include NFC payment, mobile over-the-air (OTA) payment and biometric authentication methods. Related technologies will also impact the payment landscape, albeit more indirectly. These include the Internet of Things, mobile application stores and automatic content recognition. The tipping point will be surpassed when NFC payment and mobile OTA payment technologies mature.”
Nothing will give Mobile Payments a greater push up the slope, than Apple coming out with NFC included in the iPhone 5 and linked to the iOS6 Passbook application with coupons, tickets and loyalty schemes. It’s coming, watch this space.
Will mobile payments be the death of plastic cards?
A couple of weeks ago I posted an article by Brett King (author of Banking 2.0) on the LinkedIn Mobile Payment Strategy group. The article generated a lot of interesting comment from industry players around the world that I thought would be worth sharing on this blog. The link to the article and the LinkedIn group is here.
The article’s premise was that rather than being a threat to Cash payments, Mobile Payments are more likely to result in the Death of Plastic Cards. The recent Starbucks / Square deal demonstrated that payments can be made simpler with the use of mobile, without the fraud issues currently plaguing mag-stripe cards in particular. Brett stated that customers will flock to adopt the new payment technology to “a much simpler, better informed payments interaction, plastic just looks dumb, insecure and outmoded.”
I agree with Brett in that disruption in payments is not going to come from the incumbents (Amex, Visa and MasterCard), but from new players like Square, PayPal and Apple – its already started and will lead to fundamental changes in the Payment Card industry, eventually leading to the “Death of Plastic”.
Generally the comments on the article agreed that Mobile Payments will be disruptive leading to significant changes for both Cards and Cash usage for payments. Some key points that were also brought out included:
- Apple launching the new iPhone 5 with NFC will drive a lot of the adoption of NFC based mobile payments (see my earlier post on this topic here).
- Merchants will be the primary benefactors of the death of plastic with lower processing costs / merchant fees as new players come into the market with better value propositions (as per the Square / Starbucks deal).
- More convenience for the consumer including the bundling of coupons, offers, loyalty cards, receipts, etc automatically into the payment transaction and generating all the appropriate discounts.
Despite speculation Apple’s iPhone 5 will come with NFC Digital Wallet
Recently the speculation about the inclusion of Near Field Communications (NFC) in Apple’s iPhone 5 switched from “Yes it is definitely In” to “No it’s definitely Out“. I believe there is a strong case to support Apple including NFC in the iPhone 5 based on Apple doing things a little differently.
The original speculation was driven by a photograph of a partly assembled iPhone 5 front panel with what looked very much like an NFC chip installed (see picture). 
Later, further analysis of the photographs and the iPhone 5 construction came out with the view that NFC could not be included because the metal back of the new iPhone wouldn’t allow enough room for the NFC antenna and because of power consumption concerns in conjunction with the new LTE 4G comms technology that will be in the phone. See article here.
However, this is Apple so “Think Different“. Apple was granted a patent in April 2011, which covers the addition of an NFC antenna to the front touch screen sensor panel, eliminating the need for a separate space consuming RFID antenna.
With the inclusion of Passbook in iOS 6, Apple has implemented the infrastructure for an iWallet (as well as loyalty, coupons, tickets). Along with this, some 250 Million iTunes accounts all with Credit Card payment information, give Apple the ability to be a game changer yet again, this time in Payments. All that is missing is NFC, to actually transmit the payment information at Point of Sale – it has to be there.
With the recent acquisition of AuthenTec finger print security technology, Apple also has the ability to add additional bio-metric finger print scanning security to iPhone payments. This will address a lot of the security concerns with mobile payments and further smooth the way for the introduction of mobile payments and a great customer experience.
Meanwhile, Visa, MasterCard and major retailers have been quietly rolling out Contactless payment terminals at Point of Sale globally (over 150,000 in Australia alone) putting the retail infrastructure in place for NFC payments to take off. Watch this space.
All this, even without the recent moves that the competition (Google Wallet, ISIS, Square, PayPal) are making in mobile payments, means that Apple must move now or risk loosing the advantage in what will be a huge market. Hence, NFC must be there in the iPhone 5.
Google Wallet’s not just for credit cards; here’s what it might hold in the future
Looking more like Apple’s Passport App coming with iOS 6. Makes sense for Apple to include Mobile Payments capability.
Who are (some of) the players in mobile payments?
Good breakdown of some of the major players (USA) in Mobile Payments.
Having spent some time researching different players in the mobile payments space, I have come up with a list focused primarily on Europe and the U.S.
The list is sorted alphabetically by the brand name (followed by an organization, if applicable) and may include companies, exchanges, associations and resellers. Its purpose, and that of the accompanying Venn diagram, is to have a visual representation of the mobile payment players and their direct/indirect competitors.
How did they get where they are? Did they grow organically or by acquisition or merger? I have included as much information as I have about each organization.
Note: this list was last updated on Sept. 1, 2012
1. Aisle Buyer (acquired by Intuit 04/2012)
2. Boku (via an acquisition of Paymo and Mobillcash)
3. Cimbal
4. Dwolla
5. FaceCash
6. Google Wallet (includes acquisitions of Zetawire, TxVia)
7. GoPago
8. GoPayment (Intuit)
9. InnerFence
10. ISIS…
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A tale of two iPhones — what an NFC-equipped iPhone would do to the mobile payments market
I go with option 1. NFC on the iPhone 5. It makes sense for Apple to go now and wait for the NFC enabled payment Infrastructure to catch up.
Apple iPhone 5 mobile payment wild card
The new iPhone 5 with iOS 6 is due to be released in September. Historically Apple has set the trends in Smart Phones which others have followed, but this time around the iPhone 5 will need to respond to the challenge laid down by the Android phones some of which already have Near Field Communications (NFC) payment capabilities. Rumours are rife that Apple will integrate NFC with the new iOS 6 Passbook iWallet, giving Apple the ability to leverage markets such as mobile payments, ticketing, coupons, loyalty programs and secure access.
It is estimated that Apple has over 250 Million active registered iTunes accounts each with valid Credit Card details to allow for app purchases, which would give Apple a significant advantage in the mobile payments race making Apple the Wild Card in the mobile payments pack.
PayPal in race with Square for Mobile Payments
PayPal is racing with Square and other tech companies to become the mobile payments service of choice as consumers increasingly use smart phones to make purchases in shops, restaurants and other retail outlets. PayPal a subsidiary of eBay has a significant advantage with over Square with over 113 Million active registered accounts across 190 markets.
In May this year PayPal announced that they had made deals with 15 USA retailers including Home Depot, Toys R Us, JC Penney and Barnes & Noble to utilise the PayPal Here payment system. PayPal has also signed agreements with Verifone, Ingenico and Equinox Payments to get PayPal’s payment technology onto their networks of payment terminals. The full article can be found here.
This week news also emerged that McDonalds are currently testing PayPal Here in 30 McDonalds stores in France with the objective of cutting down the payment transaction time by using customer PayPal accounts. if this is successful, it would open up a potential market for PayPal in 30,000 McDonalds stores globally. See the full article here.
Starbucks Square’s deal shakes up Payment Industry
A couple of weeks ago Square Inc a two year old San Francisco start-up founded by Twitter co-founder Jack Dorsey, announced that they will be taking over the processing of all the payments for Starbucks 7,000 USA retail stores. As part of the deal Starbucks will be investing $25 Million in Square and Starbucks CEO Howard Schultz will join the Square board. The Wall St Journal article on the announcement is here.
Starbucks acquired its stake as part of a $200 Million funding round that valued the company at $3.25 Billion (twice what it was valued a year ago). If you have 17 minutes to spare the WSJ video interview of Schultz and Dorsey on the link above is worth watching.
Initially, the Pay with Square application will allow Starbucks customers to show their mobile phone and mention their name to complete the payment in a Starbucks store (by scanning a 2D barcode on the phone). Later Geo Location functionality on the smart phone will be used to identify customers who have checked into the store and allow other associated smaller retailers in the area to promote special deals to the customer on their phones (even using Starbuck loyalty points).
Square was previously known for its white Square dongle that plugged into the audio socket of the iPhone and iPad to accept Credit Card payments that was used by numerous small businesses and taxi’s in the USA. This was a significant departure for them and would increase their payment processing capacity significantly (before Starbucks it was already estimated at $6 Billion p.a. – Starbucks could more than double this).
Shortly after the announcement shares in traditional EFTPOS Payment processor Verifone, with a significant slice of the US and international payments market (estimated at $10 Billion p.a. in the USA alone), dropped more than 10% on the USA share market and prompted their CEO to quickly make a statement saying the deal was good for Verifone as they had been busy adapting to the burgeoning mobile payments market as well and had released a Square-like mobile service called Sail. See the article here.
A week later news also came out that Wal-Mart, Target and 7-Eleven in the USA had joined together and were developing a “mobile payment network” to allow customers to pay with their smartphones. The system, known as Merchant Customer Exchange, will be driven by the retailers themselves and would include a number of other retailers including Best Buy, Sears, CVS and Publix. They are in discussions with banks and payment networks and were looking integrate their promotions into the payment processing application. The Article is here.
With all the talk around mobile payments a number of the traditional (and some new) payments companies have joined together to form a Mobile Payments Committee as part of the Electronics Transactions Association, hoping to define the future of commercial mobile transactions. The companies include Visa, MasterCard, Amex, all the USA mobile phone carriers, Google, ISIS and PayPal (significantly Apple and Square were not included).
August has been a big month for mobile payments, topped off as McDonalds has now just announced that they are trialling a new mobile payment system using PayPal Here in 30 locations in France. PayPal has also struck deals with more than 15 large retailers in the USA including Home Depot and Office Depot to accept PayPal payments (see next post).
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