We’ve been talking about mobile payment for several months now and that the mobile/banking/credit card/payment processing industries have been waiting for a clear winner. We have speculated that Apple could be the missing link here, especially because it already has such broad traction* with iTunes payments attached to credit cards.
Today at its Worldwide Developers Conference (WWDC) in San Francisco, Apple unveiled “Passbook” for iOS 6, which appears to be a step toward mobile payment domination for the company.
"Passbook is a new mobile wallet from Apple that will debut in iOS," wrote Gizmodo's Brent Rose of today's announcement. "It allows you to combine a ton of your payment cards into one convenient place. It's intuitive, and pretty spectacular."
"Passbook provides one place for tickets and coupons, with alerts for updates such as plane delays or the proximity of a merchant for whom the user has a card," wrote Elinor Mills of CNET News.
Passbook is definitely the beginning of a huge mobile payment play by Apple. They already have the user accounts, and with Passbook installed on every new iPhone out of the box, it will be very difficult for other competitors (PayPal, Google, Amazon) to convince users to download their app unless it is significantly differentiated.
This first version probably won’t disrupt the other players too much (expect maybe to scare them), but if they do add payment through your iTunes account, it will be huge. Outside of payments directly, the other components of Passbook (coupons, tickets, boarding passes) are also very appealing. These features will get a lot of people using the app frequently, and also make it even harder for other players to compete.
There is a huge opportunity for Apple to take their dominance of selling digital products (apps and iTunes media), and migrate to physical goods as well, and this looks to be the beginning of that shift.
The consumer value of Passbook will depend on which companies get on board with it. Convenient payment and consolidated customer loyalty integration are the key selling points.
Just by looking at the companies Apple has signed up (see above photo), the Passbook snowball is already rolling.
The current Starbucks app, where you can pay for drinks with your phone, is really good, but I’m not going to download a seperate app for every single store I want to shop at. Consolidation is a huge for Passbook adoption: If multiple stores have a "card" in Passbook, it’s much easier to just use them when you need them and forget about it the rest of the time.
Interestingly, Apple is actually making a move to reduce the creation of third-party/branded mobile payment apps here -- a lot of stores that might have built an app would be better served by a Passbook "card."
So, what will competitors (mobile/banking/credit card/payment processing) have to do to keep up with Passbook?
It’s hard to say. The success of Passbook is going to depend on third parties generating the "cards" for it, so the best thing that competitors could do now will be to make their offering more compelling for retailers than Apple’s.
Similar to the App Store, if Apple becomes the default choice when a company is looking at adding this sort of functionality (tickets, coupons, or mobile payments), the game is over for the other competitors.
*Owen Thomas of Business Insider reports that Apple CEO Tim Cook announced at WWDC that Apple has 400 million active credit cards on iTunes and App Store accounts. By comparison, Amazon has 152 million active accounts; PayPal has 110 million active accounts.