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Apple Dips Toe into Payments with 'Mobile Wallet Lite'

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Apple (AAPL) is launching a de facto mobile wallet, its much-anticipated first foray into the competitive mobile payments field.

The company's new app, known as Passbook, can store information for multiple loyalty cards, concert tickets and airline boarding passes on the user's iPhone or iPad. The app displays a barcode that can be scanned to redeem rewards at the point of sale or tickets at the door or gate.

Retailers like Starbucks could potentially put their payment barcodes on Passbook, according to a report in Apple Insider. Using software from the mobile banking vendor mFoundry, Starbucks' own mobile app lets customers pay for purchases by generating a bar code on a mobile phone. The app also allows customers to reload their stored-value accounts over the airwaves.

The mobile wallet niche is already flush with competitors, though none have the ubiquity in the mobile device market as Apple. Google (GOOG) has a live digital wallet that is being offered on the Nexus S 4G phone that is being carried by Sprint (NYSE: S) with participation from Citigroup (C). Isis, a digital wallet backed by rival carriers AT&T, Verizon Wireless and T-Mobile, is being tested in Austin and Salt Lake City. In the meantime, Sprint is reportedly planning its own mobile wallet that may compete with the one that it offers through Google.

The Passbook app will be built into Apple's new iPad and iPhone mobile operating platform iOS 6, which is set to be released in the fall, according to news reports. Apple unveiled Passbook at its worldwide developer's conference in San Francisco Monday. Passbook will reportedly use geolocation technology that will pull up loyalty cards when a user walks into a store.

"Ultimately [Passbook] will be a frictionless way for them to start dabbling in the [payments] business," says Brian Riley, a senior research director in the retail banking and cards practice at CEB TowerGroup. "It's a mobile wallet lite." It remains to be seen how this app will interact with other iPhone software, and how much risk the hardware giant is willing to take on to handle transactions. "They haven't really made the crossover, yet," says Riley. "This certainly gives them a test bed to start learning the business and start putting their chips in the game." Earlier this year, Apple was awarded a patent for an "e-wallet," the business technology news website ZDNet reported.

The patent laid out a scenario where a parent could set up a prepaid card for a child, the website said in March. "It also notes that the functionality could be used by an employer who wants to set rules for an employee's handset-based payment account." Passbook could be the outgrowth of that idea.

Madeline Aufseeser, an analyst at Aite Group, says it's unclear how many retailers, other than Apple itself, currently have point-of-sale systems that can scan barcodes from Passbook. She's "not sure that loyalty and prepaid partners would latch on till more questions are answered."

Further down the line, it is conceivable that retail banks could link accounts to bar codes to better integrate with Apple's devices.

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