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Apple-Visa alliance would redraw mobile-payments landscape

Apple?s sizable base of affluent users and customers could spur further growth in mobile payments if it were to form a partnership with credit-card company Visa as speculated, one of three pieces of news to emerge about the maker of the iPhone and iPad.

Speculation that an Apple-Visa alliance could be unveiled as soon as this fall to coincide with the Cupertino, CA technology company?s iPhone 6 launch, grew after Pacific Crest analyst Josh Beck said Visa?s system changes, including improved security, raised the prospects for an Apple tie-up. Complementing that news was Apple?s announcement that it brought in former Burberry and Nike social media director Musa Tariq as its retail division's new digital marketing director and a Strategy Analytics report showing that Apple TV sales growth has slowed significantly this year, down to a 12 percent annual growth rate.

?It seems like what they?ve been focused on now in the second era of Apple without Steve Jobs is alliances,? said Patrick Denney, chief mobile architect for Headspring Mobile in Austin, TX. ?That?s a key for them. They?ve faltered in the past. 

?It?s time to step up in alliances. I think they?re getting into areas where they know they have a weak spot.?

Imminent move?
The moves were seen as the technology giant?s attempt to address weak spots in its business years after the death of legendary founder Steve Jobs. The rumored mobile payments system was the big item, analysts agreed.

Recent reports suggested that Apple was talking about mobile payments with Visa and other credit card companies, suggesting that the company?s long-rumored play in the space could be imminent.

Apple is seen as perfectly positioned to be a key player in mobile payments. It controls hundreds of millions of cards and devices that can be linked to payment cards.
Building a mobile payments system, however, is a notoriously complex undertaking that has challenged big companies such as Google and AT&T. 

Starbucks? mobile payments and loyalty framework has proven that it is scalable. The coffee retailer is clearly one of the big success stories in mobile payments so far, with nearly 12 million active monthly mobile users in the United States and mobile payments now accounting for over 15 percent of transactions in company-operated stores.

Translating this success into a technology platform for other merchants could be a challenge. Selling a technology platform requires a much different skill set than selling lattes.

Mobile strategy
Nevertheless, starting a mobile payments system would be hugely significant for Apple and its mobile strategy.

?Nobody likes going into the store and having to swipe their card every time, entering your pin number, which is annoying,? Mr. Denney said.
?If you could put that PIN number on your phone so it?s just as easy as swiping your phone over it, and it would take my Visa card, that would be perfect.

?Now that you have the finger-lock as well that?s going to work wonders with this mobile payment. If I lose my phone, nobody can unlock it.?

Visa mobile-payments app demonstrated on company Web site.

An Apple-Visa mobile-payment system would take time to perfect.
?The road to broad scale mobile payments in the U.S. likely goes through Apple,? said Rick Oglesby, senior analyst /consultant for Double Diamond Group. ?There is little that the payment industry can do to incentivize a mobile conversion without major partners on the mobile commerce side, and Apple looks to be the biggest mobile commerce partner in existence.
?However, pre-existing point of sale infrastructure is not ready for a large-scale mobile payments roll out, so it will still have to take place over a considerable amount of time.?

Its assets notwithstanding, Visa also would bring limitations to a tie-up with Apple. If the company chose to live with the limitations to placate the payment industry, it would open up many opportunities to partner with key players in the payment ecosystem, according to Mr. Oglesby. At the same time, the limitations could inhibit the delivery of an optimal user experience and consumer/merchant value proposition.
Any partnership would require significant, joint technology development efforts to maximize the opportunity, create the right consumer and merchant experiences, and overcome the many obstacles and limitations, Mr. Oglesby said.

Major impact
?Everyone has been waiting to see what Apple is going to do to accommodate payments, and their lack of stance on mobile payments has been a huge drag on the industry,? said Nikki Baird, managing partner with Retail Systems Research.

?Given their high percentage of smartphones, whatever direction they go, it?s bound to have a major impact on the whole rest of the ecosystem.?

The rumored alliance would represent Apple?s effort to move forward after Jobs? personal limitations slowed its progress somewhat.

?He was certainly a visionary but he was also trapped in his own mind of innovation,? Mr. Denney said.

?Now we?re seeing the move toward, ?OK guys we realize this is an area that other people are stronger than us. Let?s integrate with them rather than build it ourselves because we have other things to focus on. We innovate in hardware and we innovate in software. We don?t innovate in enterprise, we don?t innovate in the mobile payment market and we don?t want to get into those.

?If they come out with the iPhone 6, you?re have about 50 percent of the users automatically upgrade and Visa knows. this. So it is a good hardware investment for them. If they buy into this, it can work, because we know the key demographic is going to own iPhones and you are going to get more money that way.?

Final Take
Michael Barris is staff reporter with Mobile Marketer, New York.