From a historical perspective, payments industry observers know a few things about Apple Inc. It’s not knowing the company’s future plans that have them edgy.
Apple takes its time developing any new product. And it won’t release a new one unless it is certain to be a winner in the eyes of consumers.
However, the payments world collectively has been contemplating the past few years about when, or whether, Apple intends to join the mobile-wallet battles with Near Field Communication-enabled phones or its own mobile-payment method.
And that has led to intense speculation about Apple and its intentions.
A July 6 Wall Street Journal report adds some fuel to that fire, mainly because the story indicates the secretive computer giant out of Cupertino, Calif., is balking at a mobile-payments entrance, partly because of concerns about NFC security and its power demands on Apple’s iPhones.
Because Apple executives are notorious for not speaking about new products until the company president makes an announcement, the Journal report cites sources close to Apple proceedings to shed more light on topics industry analysts have speculated about in the past.
The Journal quotes Phil Schiller, Apple’s head of worldwide marketing, as saying Apple does not intend to fight over a piece of the digital-wallet space that other companies are battling over.
The article also refers to sources familiar with Apple meetings and strategies, noting Apple engineers have been trying to determine how to exploit the company’s popular iPhones and iTunes store into payments methods within the iPhone or by establishing a payment network of its own.
In addition, Apple contemplated the use of existing “payment middleman” companies and taking a small cut of payment transactions instead of establishing another layer of fees. However, it appears Apple has since scaled back its overall plans, the story noted.
After patenting some NFC technology for a mobile wallet, Apple employees began to worry about the security of the technology and whether the antennae and computer chip would drain an iPhone’s battery life, the story added.
Executives also expressed concern about the slow adoption of NFC among retailers and whether the Internet eventually would provide a more secure method, the Journal noted.
Oddly enough, many of those retailers likely are waiting on Apple to determine what it plans to offer to the payments world.
If the Journal report provides an accurate indication, it could be that the Apple “passbook,” or “mobile-wallet light,” as some in the industry have dubbed it because it can’t link directly to credit or debit cards, might be as far as the company intends to go in 2012.
Thus, industry speculation about NFC technology in the next generation of iPhones, which most expect Apple to announce this fall, may be off base.
When considering that most technology companies attempting to build payment networks have not had great success, it makes sense that Apple would be reluctant to jump into that arena, says Richard Oglesby, senior analyst and mobile pay expert with Boston-based Aite Group.
“I don’t see Apple having the appetite to do their own payment network to try to drive payments,” Oglesby says. “It’s just not in their core business.”
So far, the only mobile-payment initiatives that have enjoyed any level of acceptance or success have been “small, community-based” operations such as Starbucks Corp.’s closed-loop mobile payment system, or Square Inc.’s payment device for merchants, Oglesby adds.
Apple is too big to get involved in smaller projects, he adds.
But that leaves limited options for Apple. “The broad, open-loop systems are not anywhere close to being resolved [with a successful formula] at this time,” Oglesby contends.
Meantime, it is “totally understandable” that Apple executives would worry about such things as battery life on an NFC-enabled phone, Oglesby claims.
Plus, not enough merchants have committed to NFC, he says.
But Apple is “going to have to make some kind of play” in the payments space because competitors increasingly are introducing NFC-enabled phones, says Brian Riley, senior research director and analyst with Needham, Mass.-based CEB TowerGroup.
“This is a different world than what they are used to because you may have to take it on the chin and lose money when you first enter the payments business,” Riley says. “They can look at Google’s recent strife to see that.”
However, Apple also sits in a position to simply keep providing hardware and new devices to facilitate other payment operations and “not get their hands dirty” with propositions or initiatives that lose money, Riley suggests.