How Apple plans to dominate mcommerce
January 23, 2014
An in-store offer from a beacon
Apple’s newest patent foreshadows an unsurprising attempt at monopolizing the mobile commerce space with its own technology, iBeacon.
The U.S. Patent and Trademark Office just published Apple’s 2012 patent application for a touchless "method to send payment data through various air interfaces without compromising user data.” Apple seems to have been waiting patiently while the mobile commerce space settles, but perhaps the tech giant is getting ready to pounce, continuing its reputation of controlling the mobile space.
“This is pretty clear in stating that Apple still does not plan to use NFC as a payments technology,” said Rick Oglesby, senior analyst at Aite Group, Boston. “The patent keeps open the idea of using NFC as a pairing technology to pair a POS device with a consumer’s mobile device, but the transaction is cleared through a secure over-the-air transmission.
“This lines up well with what Apple has already done in its own stores as well as with the future potential use of iBeacons/Bluetooth low energy as a pairing technology,” he said.
“We may well see Apple adopt a version of NFC that does not provide the NFC chip with access to the secure element, which would be a way to lock third parties out of the payment process and allow Apple to control it.”
According to the patent’s abstract, “The method first establishes a secure link over a first air interface by a purchasing device. This secure link is between the purchasing device and a point of sale device.”
By linking the two devices, a secure commercial transaction will be able to take place.
Granted this could refer to both NFC and Bluetooth technologies, but Apple seems to be headed towards the latter.
Apple introduced its own Bluetooth technology, the iBeacon, to its retail stores in December, showing its preference for the technology over NFC (see story).
Other patents that Apple has filed for such as the "Wireless network authentication apparatus and methods" 2010 patent follows in line with Apple’s quest for domination and paired with the newest patent would allow Apple to take control over the mobile commerce sphere.
However, Mr. Oglesby predicts that this year Apple will only add incremental changes to its checkout solution and that a big launch is in the far off future.
“Apple has not yet moved to commercialize mobile payments outside of Apple-controlled marketplaces, but it appears to be building incrementally towards that eventuality,” he said. “The company is well positioned to begin offering these services to the general market but the market isn’t really ready yet so no need to hurry.”
Beacon vs. NFC
Experts have been challenging the ability for NFC to take on as the leading technology for mobile payments.
One major obstacle is that a large chunk of consumers still do not have phones that are NFC-enabled.
“People have been questioning Apple's divergence from the NFC payment model, but as we have seen, it hasn't gained much traction in the market place,” said Patrick Denney, chief mobile architect of Headspring Mobile, Austin, TX. “The impact on device battery life, a lack of broad adoption, range limitations - those have all played a part in NFC’s downward trend.”
Beacon and Bluetooth technology, on the other hand, solves those issues.
“The range is more than adequate, battery impact is minimal, and with the many potential marketing uses for iBeacon, we are already seeing success from early adopters like Estimote, a Beacon development company, who just received $3.1 million in a seed round,” Mr. Denney said.
As opposed to Mr. Oglesby, Mr. Denney expects a change to take place as soon as June of this year, possibly related to iOS 8.
“I think Apple was right to sit on the sidelines and observe for a bit,” Mr. Denney said. “NFC never really took off due to some major limitations.
“Mobile payments will be just one subset of what iBeacon will be used for,” he said. “With the growing machine-to-mobile trend, you can expect to see an exploding market of iBeacon-compatible devices popping up.”
While Apple definitely has the power to take over the mobile payment space, at the end of the day, there is still the question of utility.
Whatever technology Apple chooses, it needs to be easier and more beneficial than traditional forms of payment.
“I think the real question you have to ask is, ‘What consumer problem does mobile payments solve?’” said Paula Rosenblum, managing partner at Retail Systems Research, Miami. “If you can answer that question, then you’re kinda sorta on your way to figuring out which technology is going to win.
“My own opinion is that anything that requires reaching into my pocket/handbag is as valuable as any other technology that requires reaching in my pocket — ie. not so much,” she said.
Rebecca Borison is editorial assistant on Mobile Marketer Daily, New York
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