Mobile Payments..The Next Big Thing

Everything is pointing to mobile payments as the next frontier that Apple will conquer with the introduction of the next iPhone. They have been awarded several patents for mobile commerce and rumors from suppliers support the idea that they will adding a NFC chip to the next iPhone. Here are the reasons I think this will be a massive game changer for mobile and social commerce:

  • Apple already has 160 million credit cards on file for iTunes, they will set up a system somewhat like PayPal where transactions are directly debited for your checking account to pass over the 2-5% fee charged by the credit card providers.
  • Retailers hate the current credit card providers, ask any small business or restaurant what they hate most and this will be at the top of the list. If Apple delivers a simple, transparent, user friendly system – watch out American Express and MasterCard, hello iBank.
  • NFC is not new technology, it has been used in Japan, South Korea and throughout Europe for a long time, the payments are often collected by the phone service providers (you better believe Apple will cut them out of this). It is used for subway and bus passes over here, etc. Apple wil come to the table with a simple system that will empower even Mom to link up her iPhone to her bank account.
  • I think the possibilites this business will spawn are seemingly endless. They could push to replace all of the frequent shopper cards stacked in your wallet or purse with a simple loyalty system across all of your purchases. This would allow them to set up something similar to dunnhumby.

There will a huge amount of competion for this space from the current card providers, upstarts like Jack Dorsey’s Square , Facebook and their Points currency, and Google. How will it all shake out is anyone’s guess. I would probably place my early bet on Apple for two reasons – the iPhone is wildly popular and the device most ready to make it a good experience and Apple’s ability to take existing technology and bundle it into a seamless user friendly experience.

4 Comments

  1. Rob,
    Great insight into the mobile payments space.
    The banks and credit card companies are pretty powerful lobbies, unless they embrace this concept for themselves (and build their own applications that enable NFC transactions) I think adoption is going to be slow and painful.

    I think about how terrible the adoption for the speedpass has been and wonder why everyone can’t transition from the card to the air?

    There needs to be a killer application with a low barrier to entry for the consumer – like a soda machine for goodness sake – to help people understand how valuable this kind of technology can be!

    Thanks again for the insight!
    – Drew

    1. Hi Drew,
      Just from personal experience I think the low adoption of things like Speed Pass have been more about having to add the extra stuff to your keychain for each credit card or loyalty program. I think most consumers don’t see much added benefit from just keeping a card in their wallet. The beauty of having everything on your mobile device is the ability to leave a lot of those cards at home. The benefit to the seller is that it also removes the consumer another step from using actual cash making the purchase more impulsive. If I had to pull a $10 bill out of my wallet every time I wanted to download an album on iTunes or a Kindle book from Amazon for my iPod I think I would have a lot less content on my iPhone and iPad…it is easy.

      1. Point well-taken. It’s always easier to use something you’ve got rather than add something new to the mix.
        Have you tried the Starbucks app yet?
        – drew

      2. I have tried the Starbucks app…it is difficult to scan the iPhone – don’t know if it the reflection from the screen or what. That is why the NFC chipset will be a big win, I think that is where you will see a lot of loyalty programs move. It seems like a big opportunity for Google to deploy a mobile/social CRM that works well with Google Analytics….and an interface that marketers are familiar with.

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