The competition to turn mobile phones into wallets has turned up lots of options as handset manufacturers, telecommunication companies and other stakeholders battle to control how the phone is used to execute payments.
Apple’s Inc.’s latest Near Field Communication patent is an attempt to seize that control by forging a direct automated connection between consumers, merchants and card companies, enabling Apple to ply its popular iPhone and iTunes Store into a mobile transaction machine.
“Given their iTunes program and their reach, Apple is positioned to have a successful following for a mobile wallet,” says Adil Moussa, a senior analyst at Aite Group.
News of the new Apple patent was first reported on the Patently Apple blog early March 7. Apple did not return a request for comment by mid-day March 7.
The U.S. Patent and Trademark Office in November also published 31 patents granted to Apple related to NFC technology and what appears to be a new location service that uses the global positioning system (see story).
The patent announced this week covers a method to allow an embedded NFC chip to be used to execute mobile payments when an iPhone user pays at a point-of sale terminal. The patented technology allows card companies to send information to a user’s iTunes account for NFC-enabled iPhone purchases. The patent also covers management of payments by secondary accountholders, such as family members or employees of a business.
The patent application includes rules regarding how these payments would be managed and executed, such as limits, product restrictions and geographic parameters. Also, the patent filing describes how users would view statements and receive alerts when spending is about to exceed a predetermined limit.
Apple is notoriously cagey about its future plans, but all of this would portend a future NFC-enabled iPhone that includes a mobile wallet. This wallet could be used by both consumers and businesses, which could leverage rules to include location-based special offers, spending controls and security measures to cancel rule-breaking transactions.
“The thing with Apple, they are very secretive; you don’t know how it’s going to play out and how they will do it and through which platform,” says Moussa.
Apple would join a crowded field of mobile-wallet contenders, including Isis, a telecom-driven consortium including AT&T, Verizon and T-Mobile; and Google Wallet, the participants of which include MasterCard, Citigroup and First Data.
Various terminal makers also are supporting the Isis wallet for acceptance (see story).
“The new patent is a huge, though not unexpected, move on Apple’s part, and it has major implications for the mobile-payments world and, in the long term, the payments space as a whole,” says Peter Wannemacher, an analyst for Forrester Research.
NFC is a vital element in the plans of these initiatives, but there are several versions of how NFC can be delivered, with telcos and handset manufacturers such as Apple each having their own preferences.
In the case of Apple, the embedded NFC chip would allow storage of data on a secure element on the phone, which puts Apple in control. Telco-driven wallet initiatives such as Isis prefer SIM cards, which store the international mobile subscriber identity and a key used to authenticate subscribers to mobile services.
The advantage of SIM cards is that consumers can insert them into different phones to activate that phone as a mobile-payment device, making mobile-wallet capabilities accessible to a wider variety of phones. Apple also has patented technology that covers the sharing of information between devices, such as iPhones, iPads, Mac computers and point-of-sale terminals.
While an NFC-enabled iPhone would increase NFC-embedded phone coverage dramatically, mobile phones with NFC aren’t widely available currently. In the U.S., only the Sprint Nexus S 4G and Samsung Galaxy Nexus have embedded NFC chips.
Apple’s moves aside, the battle to control ownership of the consumer data tied to the mobile wallet is still far from over, Wannemacher says.
“I would stress a truism: if you are focused exclusively on the NFC aspect of mobile payments, you are missing the point. NFC technology will likely be a key piece of the puzzle, but the more powerful question is how the payment itself will be made and settled, and where the consumers’ information will live.
Will it be stored within the phone itself? Will it be branded by a bank or firm but hosted by a vendor? Will it live within the mobile banking app or mobile website on the phone?” Those are the important questions, Wannemacher says.
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