Plan to Make the iPhone a Payment Tool May Accelerate

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Apple Inc.'s iPhone payments system is coming closer to reality.

Buzz around iPhone payments reignited this week with unconfirmed reports that Apple was vying with Google Inc. to buy Boku Inc., a San Francisco company that enables consumers to charge purchases to their mobile phone bill.

The speculation follows reports last week that Apple was planning a partnership with Gemalto NV, the Dutch company that makes SIM cards for mobile phones — as well as payment cards with embedded chips.

"Apple is clearly circling its prey, which is payments," Red Gillen, a senior analyst who follows mobile payments for Celent, said.

Apple's expected move into the mobile payments market is not surprising given that it already operates a successful closed payments system, its iTunes digital media store.

Apple, of Cupertino, Calif., made waves in April when it revealed in several patent applications its plans for allowing a near-field-communication-enabled mobile device to be used to purchase physical goods.

A partnership with Gemalto and a relationship with Boku, which has numerous relationships with mobile carriers, could be the pieces necessary to bring Apple's plans to fruition, analysts say.

"I think Boku is a natural extension for them," said Aaron McPherson, a practice director with IDC Financial Insights in Framingham, Mass.

It is more likely that Apple would be interested in Boku for its connection to mobile carriers rather than for its technology, McPherson said. "Having hooks into the carriers is going to be important for any kind of future mobile interoperable payments system."

In the United States, Boku has several relationships with major carriers, including AT&T Inc., Verizon Communications Inc. and T-Mobile, a subsidiary of Deutsche Telekom AG.

Apple did not respond to messages seeking comment this week. A Boku spokesman declined to comment.

If it bought Boku, Apple would be better equipped to bill purchases beyond what it sells through iTunes. Currently Boku and other companies that provide bill-to-carrier services mostly handle purchases of games, phone ring tones and other small-dollar items.

"What's interesting to us about companies like Boku is … the potential convergence between the mobile and the e-commerce space," said Paul Grill, a partner with First Annapolis Consulting in Linthicum, Md.

"These companies are largely focused on … digital downloads and ring tones and low-ticket items for the most part," Grill said. "It starts getting a little more interesting if you can begin applying those payment forms as [consumers] shop for all kinds of goods on the mobile device."

But having Boku in its arsenal would not by itself give Apple the ability to do point of sale payments in a brick-and-mortar environment, which is "where the real battle will be fought," said Richard Crone, a payments consultant. A relationship with Gemalto could help bring that capability into the physical retail world.

Reports of an Apple-Gemalto partnership focused on Gemalto's providing reconfigurable SIM cards to European iPhone users, eliminating the need for carrier intervention in the enrollment phase. A Gemalto spokesman declined to comment.

Gemalto "could be very influential in … steering Apple toward a SIM-based NFC model," said Crone, the chief executive and founder of Crone Consulting LLC in San Carlos, Calif.

However, an NFC system puts demands on merchants, and "merchants today don't want any new hardware," Crone said.

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