The lead up to Apple’s much anticipated “really big” mobile payments announcement Apple has been rife with rumors on top of speculation about what they might do. We started the week with a PYMNTS.com commentary from Flybridge Capital Partners’ Matt Witheiler said that it’s not really surprising that Apple enter the payments market now (versus years ago). After all, he said, Apple has a tendency to let markets mature a bit and then totally disrupt them by reinventing the consumer experience.
That is certainly their pattern, Apple’s never about being first, They didn’t launch the first smartphone, but they reinveted it with the app store. It wasn’t the first to develop a portable music player, , but it reshaped how music is consumed Central to all is a new business model which, technology innovation aside, reshapes whatever ecosystem it wishes to occupy. Witheiler has a few ideas in his piece about how Apple could make money from payments (and it’s really not about the payment). As Witheiler pointed out, payments won’t be Apple’s core business, if it decides to enter the payments market as many anticipate it will. But is has some key elements that give it a good start, including 800 million payment cards on file.
Of course, Apple’s entry into mobile payment fuels the rumors that Apple is finally ready to rewrite the rules of mobile paymentIt is said that Apple will reportedly unveil Near Field Communication functionality in both its iPhone 6 and a new iWatch that will support payment at the point of sale. The NFC capability will reportedly also be used for a variety of other functions that include setting up communications between the watch and other “smart” household devices.
Naturally, that has payments innovators new and old asking whether Apple, by embracing NFC in its Aple-ish way could do what no one else has been able to do in the last decade: get mobile payments off the ground using that technology? , . Karen Webster laid out a few possible scenarios in her piece that posed that trillion dollar question: can Apple truly ignite mobile payments
Early hints
Although Apple has certainly explored NFC possibilities for years via various patent applications it has filed, it has been coy about when–if ever–it would deploy. One particularly robust source of information on Apple’s patents is Patently Apple, which has curated a massive library of patents on a variety of areas.
Since, of course, no one aside from Apple execs and a few others sworn to secrecy know what Apple really has in store for payments, one can always follow the breadcrumbs. One such trail is a the 37 patents that Apple has filed–and been granted–over the last five years that have anything to do with payments or commerce. With total and complete attribution to Patently Apple, we have provided our own short summary of each patent, and included some of the relevant patent diagrams from the site so that our readers can take a look at what was on the mind of the Apple inventor at the time
Industry help
Apple will need help, however, and that’s where existing market expertise would come into play. Indeed, Apple may be able to announce the final elements needed for it to truly leverage the hundreds of millions of payment card details stored within its iTunes and App Store databases, thanks to reported deals quietly cut with both Visa and American Express. These deals, however, reportedly go beyond granting permission to use card numbers that Apple has already collected and used over the years. They will allow shoppers to use their iPhones anywhere Visa and Amex are accepted, provided that retailer can handle an NFC purchase.
Apple also has reportedly negotiated deals with several leading issuers to extend card present rates to Apple for all transactions involving their cards with Apple’s new mobile payments scheme. On top of that concession, they have agreed to give Apple back part of the card-present interchange fees – 15 to 25 basis points – on each transaction. The issuers include JP Morgan Chase, Bank of America, Capital One, Citi and American Express.
POS acceptance
On the acceptance side, Nordstrom reportedly is sporting the identical mobile POS system used in Apple Stores. Bank Innovation reported that Nordstrom employees, who requested anonymity, say that the department store chain upgraded its mobile POS terminals a few weeks ago with hardware that will allow it to work with the “most recent iPhones.” Sources told the publication the two companies had a contract, though specifics weren’t available.
The new mobile POS units use the Lightning port, which Apple has used for the last couple of iPhone models and has said it will use for the foreseeable future.
“Other merchants—like Ralph Lauren—have made similar upgrades to their mobile POS systems to work with the iPhone 5S. Apple has partnered with other fashion brands in the past to unveil new products and features. Burberry premiered the new camera features in the iPhone 5S last September during the 2013 New York Fashion Week,” the story said. “There were other companies in the running to join Apple’s payments initiative. We were told that these merchants lost out to Nordstrom because they did not have as many physical stores.”
Security matters
As Apple purportedly intends to enter the payments market, it also will have to deal with some of the challenges that affect the industry as well. It got its own taste of that this week, when it began investigating reports that a security hole in one of its online services allowed cyberthieves to download nude photos from the iCloud accounts of celebrities.
The vulnerability in Apple’s Find My iPhone service, which tracks the location of a missing phone and lets a user disable the phone remotely if it is stolen, allowed anyone to keep trying passwords no matter how many failed login attempts were made. Once a correct password was found, it could then be used to get access to a user’s iCloud account.
On Monday (Sept. 1), Apple reportedly set a limit on login retries to prevent such brute-force attacks. Just in time for the launch of a mobile payments scheme for which consumers, above all, have to be convinced is secure.
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