Mobile Commerce Insider Featured Article

September 05, 2014

Will iPhone 6 Transform the Mobile Payments Business?

The Apple iPhone 6, among other things, will mean Apple is getting into the mobile payment business for the first time. And some of us have argued that Apple was the one company that could really make a breakthrough in mobile payments in developed markets.

The emerging issue now is whether, in fact, Apple’s presence can transform a market that has been slow to develop, even if there have been some successes, including the branded Starbucks app and credit card readers such as Square.

Proximity payments, where a smartphone replaces a physical credit card, remains the big immediate opportunity in developed markets, many expect, even if money transfers have been the bigger development in developing markets.

China might represent an unusual market where both proximity payments and money transfer develop as lead applications at the same time.  

Longer term, the big opportunity in developed markets might be banking or commerce in a broader sense. Still, the immediate measure will be the growth of merchandise sales in retail outlets where payment is made by a phone, linked to one or more credit or debit account.

U.S. mobile proximity payments are about to explode. Mobile proximity payments are payments for goods and services transacted via mobile device in bricks-and-mortar stores.

BI Intelligence, for example, estimates that mobile proximity payment volume will grow at a compound annual growth rate of 153 percent from $1.8 billion in 2013 to $190 billion in 2018, with an inflection point in 2016.

Mobile payments doubled in 2013 and will continue to grow at 43 percent annually through 2018, Forrester Research predicts.

All that noted, it remains unclear whether Apple will be able to make a breakthrough with its mobile wallet. At least so far, nothing about its approach is structurally different from what others have tried to achieve.

At its heart, Apple’s mobile wallet appears to be one more way to link credit and debit cards to phones, allowing them to act as the payment mechanism at a store.

Granted, Apple is Apple. Its market presence might be the tipping point, causing a critical mass of merchants to adopt new terminals and systems to support taking mobile payments.

But we likely are still a few years away from knowing. The iPhone ecosystem will need some time to replace older devices with devices capable of using the mobile wallet, and retailers still will have to make investments to support such payments.

The point is that Apple’s entry might help. But just how much, remains to be seen.

Edited by Stefania Viscusi

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