The Wall Street Journal recently suggested that Apple was planning to go into the mobile payments business (paywall protected), leveraging their hundreds of millions of iTunes Store accounts. While this gets away from the company’s core business, it does leverage existing infrastructure, such as a powerful payment management system and fingerprint authentication.
Would you use your iTunes Store account to buy a coffee? It’s fair to say that an iPhone-based system would be practical and easy to use, and Apple has a sterling reputation for security for these accounts. There have been no major data breaches of Apple accounts, while many retailers and online merchants suffer such problems with increasing frequency.
A number of companies are trying to get into this area. PayPal is the largest, and they have a mobile app designed for in-store payments, though I’ve never seen any stores that accept PayPal. (I live in the UK.) Two other companies, Square and Stripe, are popular in the US. But the iTunes Store has the advantage of ubiquity in a large number of countries, and familiarity among users.
One of the advantages of this type of system is that you never give out your credit or debit card number (once you’ve added it to your payment account). PayPal markets their service as being a safer way to shop online, and the same would be true if you were to use an iTunes Store account.
In addition, Touch ID – where you use a fingerprint to unlock an iPhone, or to enter your password for an iTunes Store or App Store purchase – works well enough that it could be used for payments. It’s quicker and more secure than entering passwords.
But what about going even further and using iTunes accounts to do what PayPal does today: allow people to send money to friends, families, clients and suppliers? Apple clearly has the infrastructure for this type of payment service.
There’s a lot of money in payment systems like this. Not only does the fulfillment company get a percentage of sales or transfers, but they make a lot of money on the float, the interest they earn on the money people leave in accounts. Apple is already making money from that, through the sale of iTunes Store gift cards; it’s likely that millions of people buy these and leave some of the money in their accounts for a while. But with PayPal, where you actually leave money in an account for longer, this interest can add up, even in a period of historically low interest rates, as now.
Whether Apple is merely exploring this idea, or whether they implement it, it’s obvious that buying a coffee with your iPhone would be no different from buying an app from the App Store, allowing you to use an iTunes Store account for many types of payments. Would you like to pay like that?
Note: It’s important to understand that the US is far behind other countries in terms of retail payment systems. US banks still do not use chip and PIN bank cards or NFC – near field communication – cards. Both of these are common in Europe. Chip and PIN cards are the norm, and have been for a very long time, and NFC cards are starting to become common. So any system Apple develops needs to take into account the fact that US users might be more hesitant to adopt such a system, whereas those in other countries might embrace it more quickly.