What Will Apple's iPhone Event Mean for Payments?

Only Apple knows for sure, but there are signs that new iPhone, which many expect Apple to announce at a press event Sept. 12, could revolutionize payments by putting an Apple mobile wallet into consumers' hands.

The tech giant has numerous patents describing its plans to enter mobile payments, and even if it does not announce a mobile wallet at the upcoming iPhone event, Apple's presence weighs heavily on its competitors.

Much of the speculation centers around whether Apple's iPhone, like rival handsets that run Google's Android software, will have an embedded Near Field Communication chip for wireless payments. Microsoft is also building its mobile payments strategy around NFC. 

Apple has clearly evaluated NFC technology. The company owns a patent for iTravel, an NFC-enabled method for obtaining airline tickets and boarding passes. If it puts NFC hardware in its next iPhone for this purpose, Apple could easily extend it to a more open mobile wallet. 

Further, Apple has already announced plans for Passbook, a mobile app that uses bar codes to display airline tickets, hotel check-in passes, store loyalty cards and other documents. Many payment systems, including those developed by Starbucks and SCVNGR's LevelUp, use bar codes to access a payment account. Consumers present the bar code at the point of sale, and a clerk scans the code to accept the payment.

Rival payment companies should also keep an eye on how Apple behaves after its win against Samsung Electronics in a mobile technology patent lawsuit. 

Richard Oglesby, senior analyst and mobile pay expert with Boston-based Aite Group, views the outcome of the Samsung verdict with an NFC angle. Since some of Apple's patents involve NFC technology, the verdict "puts the future of NFC in the hands of Apple moreso than ever before,” Oglesby says.

The tech experts at AnandTech insist the iPhone 5 design doesn’t have enough room for an NFC chip or antenna. However, Apple has demonstrated a willingness to redesign standard components to force them into a more compact package.

If Apple chooses to design a mobile wallet without using NFC hardware, it could also use Bluetooth wireless technology to securely send payment data. Some mobile card readers, such as Fiserv's recently announced SpotPay, transmit encrypted payment data via Bluetooth. 

If Apple sticks instead to a software-based approach to its rumored iWallet, it could follow the design outlined in a recent patent. That design allows consumers to authenticate a payment by "swiping" a finger across the screen to mimic the motion of swiping a card at the point of sale. 

Apple could improve security further by requiring biometric authentication for payments. In July, Apple reportedly entered an agreement to acquire the biometrics technology company AuthenTec for $356 million. This acquisition gives Apple the tools to at least consider the technology for authorizing payments. 

Apple could also do none of the above. The company typically watches from the sidelines for several years before launching an extremely polished product. Apple did not invent the mp3 player, but it took over the market with its iPod line. Apple did not invent the smartphone, but its iPhone changed the course of that market as soon as it was introduced.

Similarly, Apple did not invent the mobile wallet. But whether the company chooses to launch one this year or later on, its rivals are watching it closely and preparing to adapt to any move Apple makes.