Apple's wants your money
It seems likely Apple's payment solution will combine iTunes with Touch ID and the secure enclave on iPhones. The service will come to market in partnership with existing credit card firms.
"Apple has told some partners its system would involve a so-called secured element in the phones — a piece of hardware where sensitive information such as a phone owner’s financial credentials can be stored," The Information says.
The offer means consumers will be able to use their devices to pay for physical goods on the Web, inside apps and at retail stores.
Apple and Visa have discussed the service, so it's telling that Visa recently opened a plush 112,000-square-foot innovation center in San Francisco, where it will work with others to develop the "next generation of commerce applications."
Visa for change
Visa will in September launch its own new payments service, Visa Digital Solutions, following its move to end development of its own mobile wallet solutions. Visa's system works by storing a version (token) of your credit card number on your device in the secure enclave or inside mobile apps. You can instantly replace and cancel an old token if your device is lost.
The credit card firm's move to look for technology partners isn't unique -- banks and financial services are racing to forge such connections as they recognize (too late) that mobile technology will forever change their industry. MasterCard is also working with partners.
Apple's move to partner with credit card firms is good for customers, who can work with trusted entities. It's good for Apple, too, as it means up to 800 million iTunes customers should be able to use its payment system if they have a compatible device. Though it seems likely only iPhone 5S owners will be backward compatible with the full service.
The losers here will be payment processing services, who Apple will replace, and carriers, who have failed to make their own mobile payment systems popular.
There is evidence Apple has worked extensively on its payment plan:
- Apple CEO Tim Cook said he's intrigued at the "big opportunity" of mobile payments.
- iTunes holds 800 million accounts and credit cards and handles millions of daily transactions.
- Apple already has systems capable of handling huge numbers of transactions
- Work continues to transform iPads into point of sale devices.
- Apple's Apple Store app already supports limited in-store transactions.
- Apple recently began a reloadable credit card service within iTunes Pass.
- Apple is working on an NFC-based payments project in China
- Apple has also engaged in numerous initiatives that could enable payment services, including wide deployment of iBeacon technology.
Another clue is Apple's hiring this year of Tommy Elliot, a former senior director for Visa and Andrew McCarthy, a former top mobile payments executive for J.P. Morgan Chase Bank.
Forrester Research estimates that Americans will spend $90 billion through mobile payments by 2017, up from $12.8 billion in 2012.
"When Apple inevitably jumps into the mobile payments arena, its prospects look quite good," 451 Research analyst Jordan McKee said. A June survey found one in four consumers would be "most likely" to use a mobile wallet from Apple.
Given that consumers have resisted previous mobile payment solutions, Apple has the chance to dominate in this sector. This is yet another reason its platforms are secure by design -- when it does offer such services it's a no-brainer hackers will do all they can to break the Apple bank.
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