Commentary

Apple’s mPayments Strategy: Wait And See

Three guesses – and the first two don’t count – on who said this about what topic and when.

“I think it’s in its infancy, I think it’s just getting started. Just out of the starting block.”

That would be Tim Cook, Apple CEO, on mobile payments, Tuesday, April 23, 2013. In the process, he dashed the hopes and NFC dreams of many a payments players worldwide.

But his comments are oh, so Apple-esque in how the company approaches new markets and new opportunities – points that I went out on a limb to make back in September 2012 in advance of the launch of the iPhone 5. (Remember that?  The whole world was convinced it would include NFC and it didn’t.) Here’s why I wasn’t surprised then and am not now.

1) Cook’s right – mobile payments at the retail point of sale is in its infancy.  There are lots of experiments and lots of players trying new things to move consumers away from the good old reliable swipe (in the US) or dip (in Europe). Successful mobile payments solutions need to be attractive to both consumers and merchants. We’re a long way from knowing what that solution is.

2) Apple is manic about the customer experience – and today, the mobile payments experience can be a bit clunky at the physical point of sale. Now, early adopters could give two hoots about that, since they happily accept the trade-offs associated with new stuff – thus the “early adopter” label. Thank goodness for the early iPhone adopters on that front since they put up with A LOT when it was first introduced, too. But, as has become a familiar refrain in payments, changing anything related to payments can be costly for the retailer and agonizingly time consuming for the consumer, who needs a darn good reason to move off of what is known to something new. Until Apple has cracked the code on how to do that to their satisfaction, it is unlikely that we will see much happening in consumer mobile payments at the retail point of sale. The difficulty, of course, is that a satisfying experience in payments requires a solution that works for both the consumer and the merchant (see any themes here…)

3) Apple also doesn’t have any incentive whatsoever to pave the way for NFC in the marketplace. They have nothing to gain by doing that, as much as everyone who is invested in NFC might wish them to do for their own benefit. If anything, NFC could do things to compromise the Apple consumer experience – drain battery life, make phones larger, heavier or who knows what else. And, see point #2 for why that isn’t happening. NFC also potentially locks Apple into a different business model, and one which they would not entirely control – another Apple no-no.

4) But, as I pointed out in my September piece, Apple today really is in mobile payments and in fact is at the heart of a lot of the disruption in mobile payments today – but on the acceptance side of mobile payments. It is the iPhone that Square used to launch, well, Square, and ignited the dozens of Square-like mPOS schemes in market today worldwide. It is the iPad that has given birth to the disruptive new point of sale environments popping up like crocus in springtime in merchant environments of all sizes. Apple is reaping the benefit (and the juicy margins) associated with being a catalyst for change in mobile payments without deviating one iota from its core mission or lifting one finger.  And it is what most consumers and many drivers use for Uber now, too.

Now, I 100 percent percent believe that Apple is observing the user experience and overall adoption of its Passbook application. It’s monitoring the use cases associated with the many merchants that have adopted its Pass API, enabling applications with Passbook and seeing what’s sticking and what’s bombing. I also 100 percent believe that it will continue to add to its base of iTunes digital wallet users so that it has a big honkin’ base of subscribers to dangle in front of merchants when it does finally unveil its physical retail plans.

But what those plans will look like and when we’ll know is anyone’s guess, and likely something we won’t know until it is pretty close to happening. Between now and then, we might find that Apple quietly expands its merchant acceptance of iTunes outside of the Apple walled garden in a strategic fashion in order to pave the path to a broader payments entre later. Maybe that strategy will align with those merchants who are using its hardware to enable their own retail commerce experiences – or those who have Passbook-enabled their apps. Remember, it’s not just the little guys who are gravitating to Apple products these days – Nordstrom and Neiman Marcus gave its sales associates iPads not long ago, and I noticed Saks was installing iPad stands in its NY store a month or so ago too. (Okay, no editorial comments please on the retailers highlighted here). They’re not alone. JC Penney, Burberry, Puma, Kate Spade and many more are embracing the device as a way to enhance the consumer experience in a variety of ways. And, maybe it’s not such a stretch to think that an easy point of entry for Apple into mobile payments is a software push to those merchants to enable iTunes as a payment method. Voila – Apple ignites mobile payments acceptance!

One thing, though, is quite certain. When Apple does make its move, it will be disruptive and significant. And, a likely catalyst for many a new mobile commerce applications.

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