Apple quietly begins iPhone as wallet in-store trials

By Jonny Evans

The mobile wallet is becoming a reality. Apple [AAPL] has already begun plotting to turn your iPhone into an iWallet which uses iTunes as your virtual bank.

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EasyPay the Apple way

The company this week begins rolling out its EasyPay payment system in US retail stores. Available inside Apple's own Apple Store for iOS app, EasyPay lets users purchase accessories at Apple retail stores just by scanning in the barcode and completing the transaction on their iOS device.

Payment is taken using your Apple ID. Users need to enter their ID and then payment is taken using the credit card associated with their iTunes account.

This is a much bigger deal than it may seem, as World Payments Report 2011 informs:

-- 15% of all card transactions will be mobile by 2013.
-- 20 billion credit card transactions take place each year.


Apple is clearly running a semi-sandboxed experiment inside selected retail stores. The experiment? Allowing customers to buy physical goods using Apple's own virtual currency system (iTunes).

Where next?

PayPal should be shaking in its boots. And as for Google Wallet? One day, you'll be paying for your public transit fees using iTunes and your iPhone.

There's three ways Apple may choose to create a payment infrastructure. It is possible there are more, but we'll settle on three for now:

-- NFC support in the iPhone 5
Advantages: NFC is fully supported by the credit companies.
Disadvantages: NFC isn't yet ready for prime time, but is expected to reach a much wider market by 2013.

-- Bluetooth-based payments:
Advantages: It is possible now to use Bluetooth to make secure payment exchanges.
Disadvantages: There's no agreed financial Bluetooth-based transfer standard, meaning there's no back-up or insurance in case of fraud.

-- Over-the-air
Advantages: Does it matter if you wave your device across a terminal? Why not pay from where you are? You could buy goods and services in this way.
Disadvantages: I would argue that Apple's devices would still require RFID tags in order that payment status be easily verified. If RFID is required, then NFC makes sense.

In all three scenarios, the most likely outcome appears to be the first. Whenever Apple does introduce NFC support within iPhones, it will already have the data and experience from its small-scale in-store EasyPay system trial.

At present, the EasyPay.com domain name is registered to Markmonitor.com, a corporate registrar Apple has worked with in the past. The domain record was last updated in April this year. The technical contact is Californian firm, Idealab.

EasyPay everywhere?

I think Apple will work to extend the payment opportunities it serves with EasyPay. At present you can purchase accessories at certain US retail stores. In future I'd imagine this will include larger in-store purchases, and can easily speculate on one-off deals in which you may, perhaps, be able to pick up a Starbucks coffee round the corner while you're out on your shop.

What makes Apple's iTunes approach effective is that by using its existing credit service as a bank, it achieves an immediate potential user base of hundreds of millions of people, while also offering an extra layer of protection between banks and customers. If fraud takes place, Apple's insurance should protect a customer, reducing the risk to the banks.

The future is much more than this, of course.

Tie these NFC systems up with Apple's other in-development mobile technologies and there's lots of potential scenarios. Here's just three -- based on real world implementations that are already in development by members of the NFC Forum:

-- You've rented a car. In future you won't visit the rental firm to grab the keys -- they'll just email a code to your phone. Wave your phone above the car lock, enter your PIN, and climb inside.

-- At the museum you get curious about an exhibit. Wave your iPhone over the terminal and you immediately download a 3D augmented reality application which teaches you more about the exhibit you are looking at.

-- You suffer a heart condition. Fortunately your iPhone has a heart rate scanner and watches you constantly to make sure you are OK. If you aren't OK, the technology can alert nearby strangers, call emergency services, even call the location you are in to inform them you have a problem.

Some statistics may be of interest:
-- 50,000 Dutch nurses now use NFC  to track and manage home healthcare visits.
-- The Museum of London already offers interactive NFC services.
-- Over 60% of manufacturers plan to put NFC in cars.


I believe EasyPay is an Apple trojan horse as it pulls together an elegant and secure payment system based on iTunes.

It will work in this sort of fashion: you'll read the barcode on your device, wave your phone across the in-store terminal, enter your PIN code and then enter your Apple ID code.

That last approval will be critical because it will enable Apple to side-step present industry confusion as to a clear dominant NFC payment standard.

It will be interesting to see how Apple's Eddy Cue takes this new service forward.

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