I have been waiting for this day for a long time (just ask my wife):
The day when one mobile wallet becomes THE mobile wallet. The day when consumers ditch plastic cards and choose to pay via mobile phone. The day when merchants have a reason to invest in new point-of-sale technology. The day that card networks and financial institutions make concessions and reach agreements. And, most importantly, the day when that uncomfortable bulge in my front left pants’ pocket temporarily disappears.
“Is that an iPhone 6 in your pocket or are you happy to see me?”
That day is TODAY.
Well, technically, it’s not today. It’s tomorrow. But, if you receive my articles via email…THAT DAY IS TODAY.
Confused yet?
Good.
Introducing NFC
At 10am (Cupertino time) September 9th 2014, Apple is set to unveil a few new gadgets to the world – rumors include an iWatch, Apple Pay and two versions of a sixth-generation iPhone. As part of this grand reveal, there have been several sources reporting that the iPhone 6 will include NFC capability.
So, what is NFC?
NFC (Near Field Communication) is the most promising mobile payment method and refers to a device’s ability to communicate with another device via short-wave radio transmission. It is commonly referred to as “contactless payments” since, in regards to mobile payments, a consumer’s smart phone never touches a point-of-sale system.
The augmentation of our payment’s behavior is only one small effect of NFC. According to Nearfieldcommunication.org, NFC can unlock your car doors and adjust your seats. NFC can gain entry into your secure parking garage or employer’s office. NFC can establish a Bluetooth connection between 2 friends’ smart phones allowing them to send data (ie. pictures) back and forth. Retailers/museums/etc. can embed “tags” on various exhibits/displays/etc. allowing a visitor to scan and see important information (similar to QR codes). In other words, the possibilities are endless.
Introducing the iWallet
The most obvious use for NFC in the iPhone 6 would be for mobile payments through the “Apple Pay.” Since much of the “news” is speculation, I can only make educated assumptions. For example, I would expect the mobile wallet to come preinstalled on the iPhone 6 rather than requiring a separate download. However, if all of the details are not yet finalized, the latter may be required. And although Apple has successfully kept most details under wraps, we know that they have been working on this for quite a while.
For example, check out this article at Patentlyapple.com. Early summer of 2013, Apple received 37 patents relating to “financial rules for controlling subsidiary accounts.” So, picture this:
A parent can set controls on their child’s device. A parent can be alerted whenever a purchase is made or a purchase can be declined if it’s over a pre-set limit.
Pretty cool stuff, right?
YES! But, none of the above is revolutionary.
Many phones already have NFC capability. Many merchants already have the ability to accept mobile payments. And many consumers already pay with existing mobile wallets. So, the question remains:
How can Apple accomplish what others (Google, Paypal and ISIS) couldn’t?
If the Apple Pay is going to become THE mobile wallet, Apple must navigate through a complex puzzle that includes several moving parts. The “moving parts” involved in the payment process include the consumer, merchant, merchant bank (acquirer), consumer bank (issuer) and the card networks. Up until now, there has been the ol’ chicken and the egg problem. Merchants won’t adopt until consumers do. Consumers won’t adopt until merchants do. Apple must put together a plan that solves this problem and satisfies all parties involved.
Why should merchants upgrade their technology? Are the card networks going to be on board? Will consumers adopt a new way to pay? And how will this affect banks’ existing revenue streams?
While this task may be difficult, I believe Apple is the perfect company for the job and this is the perfect time to be entering the market. To express why, here are:
10 Reasons Why Apple Pay is a Game-Changer
Merchants’ perspective:
- Over the next 13 months, you (as a consumer) will likely receive a new debit card and credit card. These new cards will not only have a magnetic strip on the back (that you’re used to), but it’ll also include a dynamic chip embedded in the card. Rather than having your confidential information stored statically, this chip will constantly change – making it more secure (many other countries have already adopted this technology). The issuance of new cards COMBINED with an upcoming liability shift for fraudulent transactions give merchants a reason to upgrade their point-of-sale equipment. This equipment will not only be able to support “chip & pin” or “EMV,” but it’ll likely support NFC as well.
- As if the upcoming liability shift in October of 2015 isn’t enough of an incentive for merchants, Home Depot recently joined Target, Michael’s, and PF Chang’s (among others) on the list of companies experiencing costly data breaches.
Card networks’ perspective:
- Visa, Mastercard and American Express have all already reached an agreement with Apple.
Consumers’ perspective:
- Apple already stores the credit card information of nearly 800 Million consumers via iTunes. Also, Apple generates more revenue per account than anyone else in the industry, including mega-retailer Amazon.
- Although Google’s Android platform has surpassed Apple’s iOS, Apple owns close to 40% of the smart phone market which includes wealthy and affluent consumers that quickly adopt new technology.
- According to American Express, NFC payments are 53% faster than credit card transactions. A better experience and more convenience gives consumers another reason to make a change.
- The iPhone 6 can provide a few layers of security. A consumer can lock their phone with a finger print and the application with a unique PIN number.
Banks’ perspective:
- Banks will have access to data about their customers. Banks can use information such as “where consumers are shopping” and “what they’re buying” to build loyalty through targeted offers and rewards. Redeemed rewards and offers ultimately lead to increased spending and increased revenue for banks. It is unclear how moving from a “swiped” transaction to a “card not present” transaction will affect banks’ revenue from interchange.
Apple’s perspective:
- Apple will control yet another area of customer’s lives and could potentially take a percentage or fixed amount on each payment transaction.
- Apple is the largest company in the world (in terms of market cap and outside of oil). They are a $600 billion company. If anyone is able to demand the attention of all of the other players, it’s going to be them.
All of this speculation will hopefully turn to truth after Apple’s announcement.
*Edited “iWallet” to “Apple Pay” after Apple’s announcement to reflect the product’s actual name.* 9/9/14
