Apple could disrupt mobile payment industry, analysts say

Vast iTunes base makes it a 'PayPal on steroids,' one analyst said

Apple could cause some serious disruption in the mobile payments market if it enters that arena as reported, say analysts.

Reports noted earlier this week that Apple is planning to embed Near-Field Communications (NFC) technology into its next-generation iPhones and iPads. If the products were NFC-enabled, users would be able to pay for purchases just by waving their iPads or iPhones near retailers' payment terminals.

Similar contactless payment technologies have been around for years, but they've only received a lukewarm reception, at best, from consumers. What's likely to make Apple's offering vastly different, however, is the company's huge base of 160 million iTunes users, said Avivah Litan an analyst at Gartner.

That base gives Apple the ability to operate largely as a "closed payment system" with minimal need to interface with credit card companies and banks, she said. "They can largely shut out credit card companies if they choose to," and operate in much the same way that PayPal has done in the virtual world, she said.

Users of iTunes will probably need to continue using their credit cards and bank accounts to replenish the funds in their iTunes accounts, but that could be the extent to which those financial institutions would be involved in an Apple mobile payment system.

"I see Apple as being a PayPal on steroids," Litan said.

Rumors that Apple plans to get involved in the mobile payments business come at a time when interest in NFC appears to be ramping up. Last November, AT&T Mobility, Verizon Wireless and T-Mobile USA announced a project called ISIS under which they are working with Discover Financial Services and Barclays to introduce an NFC-based mobile payment system in the U.S.

Google offers NFC capabilities in its Nexus S Android smartphone from Samsung, and even PayPal has begun partnering with companies such as Bling Nation in an attempt to let consumers use their PayPal accounts when making mobile payments at physical locations.

Such moves are a sign of the seriousness with which large providers are approaching mobile payments, said Gwenn Bézard, an analyst at Aite Group, a financial services business consultancy. The big advantage that Apple has in this increasingly crowded market is that it already is a processor of mobile payments, Bézard said.

Already, tens of millions of iTunes subscribers use their accounts to make payments for songs and iPhone apps. By NFC-enabling iPhones and iPads, Apple will essentially be giving such customers the ability to use their iTunes accounts to pay for a lot of other things as well.

"They have 160 million users with digital wallets in iTunes accounts. They don't have to do anything other than to NFC-enable their phones," Litan said.

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