The wait is almost over and Apple’s management and its legion of fans should soon breathe a collective sigh of relief once the tech giant’s latest product line is revealed.
There will be a couple of iPhone models -- with bigger screens -- on offer and the long-awaited 'iWatch' may also make an appearance. There’s even talk of a golden iPad.
But the new devices may well be the tip of the iceberg when it comes to Apple flexing its muscles as a key disruptor. Apple doesn’t pay much heed to detractors bemoaning that the tech giant has lost its innovation edge, but the launch of the iPhone 6 is likely to set the scene for Apple boss Tim Cook to finally reveal a play that could have a major impact on the payments industry. The ramifications of this could extend far beyond just how we shop.
Apple is expected to announce its jump into the payments industry and this supposed payments revolution (via the so-called iWallet) is going to be more than just belated support of NFC (near field communications) for mobile payments.
Putting all the pieces in place
NFC technology has been around for some time but Apple has so far given it wide berth. Integrating the technology that allows two devices to transfer encrypted data at short range using radio waves has never been a problem for Apple, but the reluctance has always hinged on two factors - the overall NFC experience has been mixed for consumers and more importantly, tying in NFC to Apple’s unified world view required a lot of hard work.
Tim Cook and his team have obviously spend the last year assiduously putting together the pieces together and the flurry of agreements signed with credit card companies and retailers would suggest that the stars are finally in alignment for Apple.
Apart from the reported deals with Visa, MasterCard and American Express, Apple has also locked in deals with retailers, with department store Nordstrom and US pharmacy chains CVS Health and Walgreens.
If Apple is about to embark on an operation to install NFC sensors across bricks-and–mortar stores then we just might be at the cusp of seeing the launch of a global mobile payments platform: one that has enormous scale, the right mix of hardware and software prowess, and brand cachet to lure consumers and merchants.
With almost 800 million credit cards on file, Apple is already where it needs to be with regards to its consumer base. It has supposedly got the payment processors onside as well. But winning over merchants will be the key challenge.
Forrester Research senior analyst Denée Carrington says that the road to digital wallet heaven is littered with notable train wrecks.
Carrington notes that with iPhone users already leading the way with faster adoption of mobile payments and commerce, Apple can leverage its design chops to give customers a compelling experience.
“But motivated consumers must have someplace to use the wallet. Actually, not just “someplace,” but a great many places where early adopters shop or spend with regularity,” she said in a post.
“The expensive lessons of Google Wallet, Square Wallet, and Visa’s V.me illustrate that even with strong brand awareness and deep pockets, a merchant’s control over its checkout experience will directly affect a wallet’s success.”
It’s a pertinent point. Success in the mobile payments hinges on not just giving customers value but also ensuring that merchants are looked after.
According to Carrington, Apple’s wallet will have to deliver a compelling merchant value proposition (like lowering a merchant’s operational costs or helping to drive more revenue) in order to win acceptance and preference at checkout.
“The good news is that Apple is uniquely positioned to do just that. Unlike other digital wallet providers, Apple is a merchant itself, and has both credibility and experience in successfully integrating mobile payments that likely lower costs with faster throughput, and drive greater revenue in its own stores,” she said.
“In addition, iBeacon and Passbook -- two features widely rumored to be integrated into Apple's wallet -- are specifically designed to provide value to merchants by helping them more effectively engage with their customers.”
NFC potential: Payments are just the start
For those involved in the world of NFC, Apple’s integration of the technology will deliver a much-needed stamp of authority.
According to Ovum principal analyst Eden Zoller, Apple has been putting the pieces in place for a fully-fledged mobile payments service for some time. Passbook, Touch ID biometrics, the iBeacon feature in iOS 7, and the EasyPay feature in the Apple App Store application have all been incremental steps on the road to the iWallet.
If Apple can effectively market NFC capabilities to consumers, then merchant interest is likely to follow. There’s a conceptual branding process that is associated with every Apple product and, whether justified or not, the Apple Kool-Aid really does get consumers talking.
For Jamie Conyngham, co-founder and chief executive of Tapit, a technology platform which leverages a range of contactless technologies, Apple’s NFC ambitions may well extend beyond payments.
“NFC can be so much more than payments,” Conyngham says. Paying for items could be the first step in changing customer behaviour around contactless interaction.
“Once people get comfortable paying through NFC, they then slowly start exploring what else they can do with the technology.”
At its heart, NFC technology seeks to change engagement dynamics, becoming a bridge between the physical world and the digital one.
The potential of this in the age of the Internet of Things (IoT) is immense. The idea of your iWallet tied into your smart meter at home, with a smartphone or a smartwatch acting as the point of interface is exactly the sort of unified ecosystem play that Apple wants.
From payments, to ticketing, to advertising contactless technology is about to get a massive boost and Apple may want to be architect of the platform within which the key players choose to interact.
Minting coin from mobile payments
The iPhone 6 and the iWatch may be about to disrupt the entire point of sale proposition for merchants, but even if Apple is successful in becoming the new middleman in the payments process, it’s unlikely to be minting a lot of coin from the endeavour in the short-term.
Instead, any prospective payments play is likely to have a more immediate impact on Apple’s core business: selling lots of high-priced devices to lots of consumers.
Changing the playing field in the payments business has to be a slow burn for Apple, simply because the process of settling a payment usually involves multiple players taking a little clip.
Apple’s long-term strategy may be to become the primary operator in the ecosystem inhabited by credit card companies, banks, settlement services and security outfits but that will take time. For now, it is unlikely to deliver a deluge of revenue.
But the immediate gain of arming its latest iPhone and the smartwatch with a fully fledged and compelling mobile payments system may bring its own rewards.