Apple’s mobile payments strategy highlights one of the company’s biggest advantages over competitors: its tight control over the iOS ecosystem. Unlike the more fragmented Android environment, Apple controls the hardware, operating system, and many of the technologies developers and service providers use. That control can make it easier to introduce new payment capabilities and encourage widespread adoption across devices.
Google Wallet demonstrated how fragmentation could create obstacles for mobile payments, particularly when carriers controlled access to the secure element and merchants had little incentive to invest in supporting a payment method with limited consumer reach. Apple entered the market from a different position. By combining NFC technology with Touch ID and securing relationships with major card networks, banks, and retailers, Apple had the potential to create a mobile wallet ecosystem with broad support from the outset.
The iOS universe has a single, absolute ruler—Apple. The decisions it makes shapes how other players in this universe—app developers, accessory makers, service providers—act. Contrast this to the Android Universe, where Google is more akin to the chairperson of a raucous coalition than its unquestioned leader. Both models have their pros and cons. However, when it comes to establishing new standards that require speedy and comprehensive adoption to work, Apple’s model wins.
When Google launched its Google Wallet app, one of the key reasons for its failure was the resistance it faced from mobile carriers who were unwilling to allow Google access to its secure element, where payment credentials are stored on the phone. Google also failed to find uptake among merchants who simply didn’t see the value of enabling a new form of payment at the POS that would require both significant investment in time and capital, when few people even had access to the app.
Contrast this with Apple’s position as the ruler of iOS, no carrier would even think of upsetting the folks at Cupertino in a similar way. Furthermore, as millions of iPhone users upgrade to the next version of the phone, merchants would immediately see the value in enabling contactless NFC-enabled payments. Payments Source reports that Apple has already made agreements with leading credit card networks like Via, Mastercard, and American Express, in addition to a number of banks and retailers.
According to the Payments Source article, “Apple Inc. plans to turn its next iPhone into a mobile wallet through a partnership with major payment networks, banks and retailers, according a person familiar with the situation.
“The agreement includes Visa Inc., MasterCard Inc. and American Express Co. and will be unveiled on Sept. 9 along with the next iPhone, said the person who asked not to be identified because the talks are private.
“The new iPhone will make mobile payment easier by including a near-field communication chip for the first time, the person said. That advancement along with Touch ID, a fingerprint recognition reader that debuted on the most-recent iPhone, will enable consumers to securely pay for items in a store with the touch of a finger.”
Apple’s mobile payments strategy illustrates how control over an entire technology ecosystem can become a significant competitive advantage when introducing a new payment standard. Apple could coordinate hardware, security, financial institution partnerships, and merchant acceptance without facing many of the carrier-related obstacles encountered by Google Wallet.
The combination of NFC payments, biometric authentication, and a large installed base of iPhone users created a strong foundation for Apple’s move into mobile payments. Ultimately, Apple’s ability to align consumers, banks, payment networks, and merchants could prove just as important as the underlying payment technology itself.
Overview by Nikhil Joseph, Analyst, Emerging Technology Advisory Services
To read the full story, go to Payments Source.
