Year after year, Apple fans have expected the company to make a splash with an iPhone-based mobile payment system. And year after year, Apple has let them down — but a lot has been going on under the surface.
Many mobile payment systems, including Google's, use near-field communication technology as the starting point. To use Google Wallet at the point of sale, a consumer must have one of the few NFC-equipped smartphones running its Android software. Similarly, a merchant must have a terminal with the proper hardware to read the chip.
For Apple, however, NFC is not the key ingredient. If it comes, NFC will simply be the icing on a cake that Apple has been baking — and will still be baking — for a very long time.
"Right now, Apple devices are not NFC-equipped, but they are a more flexible environment from a software perspective than traditional" point of sale terminals, says Rick Oglesby, a senior analyst at Aite Group LLC.
Google's Android is the leader in smartphones, according to Gartner Inc., but the Android product line is too fragmented to sustain the sort of payment ecosystem Apple is building. Android devices come in hundreds of different shapes and sizes along with operating systems that are often tweaked according to carriers' whims.
Apple's i-devices, by contrast, are not customized for different carriers and have fewer hardware variations (Apple typically removes older iterations of its hardware from stores whenever a new version is launched). This allows for a uniform experience across the entire product line — and a more practical foundation for a payment system, experts say. (Representatives from Apple did not respond to inquiries made by phone and email.)
Apple retail stores in Paris and London are currently using a device from Ingenico SA that slips over iPhone and iPod Touch devices, for chip-and-PIN transactions as well as for full access to the iTunes app store, says Svy Nekrasas, vice president of marketing for the French terminal maker.
"Apple is definitely a market leader, and we have nothing in the pipeline in terms of integrating other devices to this form of payment," Nekrasas says. Ingenico is also the hardware provider for a test of PayPal's wallet in Home Depot stores using traditional point of sale devices.
Most payment systems built around Apple's devices still rely on plastic cards. Square Inc. set the tone for mobile payment acceptance with a freely distributed reader that lets small merchants accept transactions through the iPad and iPhone.
Square's reader was designed for small merchants such as flea market vendors, but other hardware makers are bringing Apple's devices into established retailers.
For example, when customers go to the women's clothier C. Wonder in New York's SoHo district, salespeople greet them with Apple's iPod Touch devices equipped with a card reader from VeriFone Inc.
The reader turns Apple devices into mobile point of sale machines that tap into the store's enterprise resource planning system.
"The Apple devices provide a more dependable platform," Paul Hoffman, vice president of business development and strategy for J. Christopher Capital, the management firm for C. Wonder, wrote in an email. Vendors offer more products that work with Apple devices than with other mobile hardware, he said.
And "there is the inherent coolness factor with Apple products," he wrote.
Perhaps even cooler: the platform cost less than $500,000 and took about four months to implement.
Its iPhone was the first successful consumer-focused smartphone. The app store concept it introduced a year later became a staple of the smartphone space. Tablet computing wasn't palatable to consumers until Apple introduced the iPad.
Even some multi-platform payment card readers are released first for Apple products. -- Daniel Wolfe, Risk/Technology Editor, American Banker