While the mobile wallet Apple is expected to launch next week could have many of the crucial elements already in place, its potentially significant impact is not likely to be felt until next year.
Apple’s long-rumored mobile payments offering could be revealed at an event the company is holding on Sept. 9. Recent reports suggest that the announcement will include key partnerships with Visa, MasterCard, American Express, banks and retailers, positioning Apple’s wallet to quickly pose competition to PayPal, Google Wallet and other mobile wallets.
“The impact from the new wallet will depend on the amount of deals at launch,” said Drew Sievers, former CEO at mFoundry and now founding partner at fintech investor Operative Capital. “If there are a significant amount of merchant deals, then the potential impact could be material.
“Apple phone users tend to be characterized as early adopters of new technology,” he said. “If there is a simple, well-supported wallet technology on the phone, then iPhone toters will most likely embrace the new system.
“For the wallet to have significant impact on the holiday season, there would need to be support for existing iPhone 5 hardware, since it will take time to churn folks off the current iPhone 5. Given that the holiday season is just around the corner, it seems unlikely that the wallet would have a huge impact this year.”
The Apple ecosystem
Merchants and app developers are likely to move quickly to leverage the new platform given Apple’s enthusiastic audience.
New iPhones tend to have strong sales, meaning there will be a portion of consumers ready to use the mobile payments solution this year. Those initial experiences will go a long way toward determining whether or not consumers adopt mobile payments on a more regular basis.
Apple's Passbook app
“Over the last few years, holiday sales have already experienced a shift to mobile and tablet commerce,” said Denee Carrington, a senior analyst at Forrester Research
“Overall, iPhone users shop and spend more than Android users so Apple's entry is likely to add fuel to a trend already underway,” she said.
“However, we may see pockets of activity as only a few mainstream merchants will likely be prepared to make full use of Apple's new payment system.”
Apple has held a September event the past several years to introduce new iPhone models. Next week, the company is also expected to use the event to launch a mobile wallet leveraging near-field communications technology.
Rumors of a mobile payments solution have surfaced in previous years during the months leading up to Apple’s September event, including that any such offering would leverage NFC. However, this time around, the reports also contain a number of other details, including the partnerships with major players, that lend added credibility.
The fact that Apple has held off until now to embrace NFC is one of the reasons why the technology has lost some steam on the mobile payments front while QR code and cloud-based solutions have gained in popularity.
However, NFC is still considered to be one of the better solutions for powering mobile payments.
Apple will also reportedly pair NFC with its own Touch ID fingerprint recognition reader to enable users to pay for purchases in stores with the touch of a finger.
When paired with Apple’s Passbook application, which enables users to save and store offers, tickets and other content from a variety of merchants, as well as with the millions of credit card numbers Apple already has on file through iTunes, and it appears that the technology could come out of the gate with a well-rounded, well-supported mobile payments solution, something that has been elusive for other players. PayPal, for example, is still trying to translate its online success to in-store purchases. Google Wallet and Isis are struggling to get consumers to embrace their offerings.
Apple will face some challenges in the mobile payments arena.
Mobile payments are notoriously complex to get right and others have a head start at gaining experience and know-how.
Apple will also need to get the new iPhone into consumers hands and educate both consumers and merchants as to how the solution works.
“Nothing that has been rumored as yet addresses all of the hurdles that have stymied wide adoption of mobile payments by consumers or merchants,” Forrester’s Ms. Carrington said. “The fact that the mobile payment system will be from Apple will certainly motivate some merchants who have been waiting to decide what wallet to accept in their stores.
“However, we don't know what the merchant's cost of acceptance will be - higher than traditional card payments or on par - we don't know the core value proposition - in other words how the 'iWallet' ecosystem will help remove friction from the commerce experience for the merchant, the consumer or both,” she said. “We don't know if or how the ‘iWallet’ will be better than today's simple and popular approach of paying with a physical card.
“Nevertheless, I expect Apple to deliver a more elegant mobile payment solution than what is on the market today, and that they will create value - or spawn a new business model - for merchants and create a better experience for consumers because that is what they do when they take on new categories.”
Chantal Tode is senior editor on Mobile Marketer, New York
Senior Editor Chantal Tode covers advertising, messaging, legal/privacy and database/CRM. Reach her at firstname.lastname@example.org.