Apple Aims to Change the Game Again With Mobile-Payments

Apple Inc. is jumping into the mobile-payments market just as retailers upgrade their cash registers to be more secure and ready to receive wireless transactions.

Chief Executive Officer Tim Cook is planning to unveil new iPhones, wearable devices and a mobile-payments system on Sept. 9, people with knowledge of the matter have said. Visa Inc., MasterCard Inc. and American Express Co., as well as banks and retailers, are forming partnerships with Apple to let shoppers pay with iPhones, and possibly using a device worn on the wrist, a person familiar with the plans said this week.

Apple is targeting a market that’s projected to jump to $90 billion in 2017 from $12.8 billion in 2012, according to Forrester Research Inc. The dynamics are changing now, as most credit-card issuers push U.S. merchants to upgrade their payment terminals to accept chip-based debit and credit cards. Those are more secure and usually capable of handling near field communication, or contactless, transactions. New iPhones will also include the wireless feature, the person said.

As Apple did with the iPod and iPhone, the Cupertino, California-based company isn’t inventing a new market. By combining existing technologies in an easy-to-use package of hardware, software and services, Apple is betting that it can further cement its products into the daily fabric of customers’ lives.

“If Apple introduces it now, while retailers are upgrading, then by next year, there could be an installed base of NFC terminals that would make it quite useful,” said Gil Luria, an analyst at Wedbush Securities Inc. in Los Angeles.

Hard Business

While Google Inc., EBay Inc.’s PayPal and Softcard, formerly known as Isis, have introduced mobile-payment services, they haven’t yet become mainstream. Wal-Mart Stores Inc., Target Corp. and dozens of other retailers have also banded together to create a mobile-payments network called CurrentC, which is being piloted in some U.S. locations and will roll out next year.

“Isis, Google, PayPal -- those are the guys that will be most impacted by this,” said Chris Gardner, co-founder of startup Paydiant Inc., which helps retailers build mobile wallets.

Apple’s move into mobile payments coincides with some initiatives that have already started to gain traction among consumers. Starbucks Corp. now processes more than 15 percent of its U.S. sales through its mobile app. Softcard has 20,000 new app activations daily, according to the company.

“Payments is a hard business,” Anuj Najar, a spokesman for PayPal, said of Apple’s entry into the market. “You need trust for a transaction to work.”

Tom Neumayr, a spokesman for Apple, and Anaik Weid, a spokeswoman for Google, declined to comment on Apple’s plans.

New Markets

“It’s in many ways overdue -- it moves the market in the right direction and it would endorse the direction that we’ve held,” Jim Stapleton, a senior vice president at Softcard, said in an interview. “Our biggest competition is the leather wallet. We are trying to shift consumer behavior and habits.”

Just as with the iPod, iPhone and iPad, which spurred the emergence of entirely new product categories and services, Apple is betting that it can foster a mobile-payments ecosystem that will fuel demand for its gadgets.

“The real reason Apple is doing this is to create a killer shopping experience that its rivals can’t replicate,” said Gene Munster, an analyst at Piper Jaffray Cos. “If having an iPhone means getting out of stores faster and making it easier to keep track of receipts, it’s going to be good for Apple’s hardware sales.”

Fact, Fiction

It’s not clear whether Apple is seeking to collect any fees from people who pay for purchases using their iPhones or other devices. Another question is whether mobile payments will be linked up with Apple’s 800 million iTunes accounts. Even if Apple chooses to collect fees, they probably won’t total more than the $800 million that Munster estimates, or the $1.4 billion predicted by Thad Peterson, a researcher at Aite Group. That translates into less than 1 percent of Apple’s annual fiscal revenue, projected to be $180.3 billion.

There’s already evidence that a mobile-payments ecosystem could succeed in the U.S. Mobile phones that do double-duty as wallets have existed in Japan since before the iPhone’s debut in 2007. Contactless technology is ubiquitous in Tokyo and other major cities, letting people pay for train rides, meals and goods using their phones.

Apple could foster the creation of such integrated ecosystems, by adding payment software and services to its tightly integrated family of products. By detecting an iPhone’s location, retailers could push coupons to customers as they shop, or monitor even let people order food based on the show they are watching.

“It sounds like fiction, but it’s going to be fact,” said Anindya Ghose, a professor of marketing at New York University’s Stern School of Business.

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