Apple's Plan For The Future Of Payments Is Coming Into Focus
The outlines of an iPhone-centered mobile payment system are beginning to emerge.
There are plenty of reasons why Apple could be successful in payments - starting with their 800 million iTunes customer accounts, most of them already associated with a credit card number (see chart, above) - but the expected iPhone 6 launch late this summer or autumn has created expectations of new payments-related phone features.
At BI Intelligence, Business Insider's subscription research service, we published a research note on where Apple is with mobile payments, and where we think it's headed. The full note and data is only available to BI Intelligence members.
WE BELIEVE APPLE'S MOBILE PAYMENTS SYSTEM WILL REST ON THREE BASIC COMPONENTS:
- iPhone mobile payments will center around Touch ID, the iPhone's fingerprint-scanning system. iPhone users will confirm their identity and authenticate transactions (both for online and in-store purchases) by pressing their finger against the scanner.
- For offline payments in bricks-and-mortar retail settings, iPhones will use Bluetooth to beam payment data to beacons, low-cost hardware that attach to walls, shelves, or countertops. With beacons, conventional checkout registers won't be needed. Customers could checkout - purchase items and have their purchases approved - through an app as they walk out of a store, without ever seeing a clerk, fishing for their wallets, or approaching a payment terminal.
- It's rumored that the iPhone 6 will also include an NFC chip. But near-field communications, a separate technology that allows phones to communicate with payment terminals, would be a bridge solution. The ultimate vision is based on Bluetooth.
- Payment information would be protected by a process known as tokenization, which means the real credit card information is never exposed, even as payments data is relayed from the phone to a merchant beacon.
This system would be easy to use, relatively simple for merchants to adopt, and secure. All the ingredients are in place, but technical and other important barriers to adoption remain. It is still an open question too whether consumers will be ready for a truly frictionless experience that dispenses with the checkout altogether.
