A Mobile-Payment Innovation by Apple

An article stating that Apple is planning on expanding their mobile payment system was published on the Wall Street Journal. Five hundred and seventy-five million people are registered on the iTunes store. Services where such a large number of payments are made on a platform are very rare.

If the system expands to the point where it sells goods and not just digital contents such as music and electronic books, this will be a big innovation. There is a possibility that this system will completely replace credit cards. As a payment infrastructure, credit cards are predicted to become dumb pipes. 


Future tasks for Apple 

There are three items on the agenda of Apple’s mobile-payment system.

The first is the linkage between terminals and cash registers. With digital contents, the verification and receiving of the products can be done within the terminal. However, if goods were to be sold, communication with the cash register on the actual store where the goods are sold will be necessary. What kind of technique will Apple use? We predict that wireless technology such as Bluetooth will be used rather than communication using IC chips.

The second are the various barriers in the stores where such systems will be implemented. There will be physical barriers such as the process of having to implement the equipment, and emotional barriers that result from the fuss that comes with the contracting and payment processes. Apple may lower the implementation cost by using a structure where users can easily make the payment using iPads. Restaurants such as Sizeria are implementing systems where people can input orders using iPod touch. Apple may be also be able to find a solution where they replace the cash register itself. 

The third is the risk of being misused. As written in the article, it can be thought that the fingerprint authentication feature was implemented in the iPhone5 to help eliminate the trouble of inputting passwords every time and to prevent others from freely using the iPhone without the user’s consent. When the iPhone 5 first came out, many people stated that the fingerprint authentication feature was unnecessary, but if we think of it as a preparation for mobile payment, it makes sense. 

We cannot understand why these features exist unless we back track from the future that is “mobile payment”. Japanese manufacturers need to put less importance on user’s needs and do their designing while focusing on the future. 


What kind of effect does the low switching cost have?

Of course, such a movement by Apple is related to the popularization of mobile payment services such as Square, Coiney, Paypal Here, and Rakuten Smartpay that have been showing rapid growth from last year. Apple must be thinking about entering the market before such services become De facto Standards, but the company shouldn’t be in such a rush. This kind of payment service, unlike previous implementations of credit cards and electronic money, has low switching costs. Thus, we believe that Apple has firm conviction that even if they start late they can still turn things around.

Digital content platforms of contents such as electronic books had a customer-retention effect where once the customer begins purchasing contents on that platform, they will continue to do so. This payment-system still does not have such a structure. 

If Apple can start the service with a very convenient method, the market will begin to change drastically.