After years of slowly gaining momentum, mobile payments are becoming one of the juggernaut markets of the technology industry. Last year Forrester estimated it would become a $90 billion market by 2017. Apple is gradually beginning to unroll and reveal their plans for this space. Their Passbook application is starting to gain traction, thanks in part to to its recent widespread adoption by various companies, and yet, impressively, it is speculated that Apple’s plans for mobile payments do not end there.
Passbook is an iOS application designed by Apple. It was announced at the 2012 Apple Worldwide Developers Conference (WWDC), and was released with iOS 6 on September 9, 2012. The application lets users store and display their boarding passes, coupons, event tickets, retail cards and other generic cards (ie. membership cards).
Passbook offers many benefits over conventional payment methods, perhaps the most obvious being convenience. People tend to carry their iPhones with them everywhere. Passbook provides the user with a centralized location for all their passes so they can always purchase goods from their favourite retailers (and perhaps more importantly not miss out on earning loyalty rewards). Important also, Passbook reduces the likelihood of misplacing one’s card as it is much easier to keep track of ones phone than a tiny pieces of plastic. Having the app available on the iPhone additionally eliminates the resource requirements dedicated to the production of a card’s physical counterpart, although unfortunately this isn’t always the case, as some implementations require the use of an existing card. Conveniently, Apple makes it incredibly easy to share passes via text message and email.
(Messaging a movie ticket)
Many features of Passbook actually outstrip those associated with conventional payment methods. Users’ passes can be dynamically updated using Apple Push Notification service. This allows the user to be notified of important information, such as a gate changes at the airport, or when the balance of their gift card changes. Since a user’s passes are stored in iCloud, these updates will be sent to all their devices. Passbook also offers the ability to display on the user’s lock screen when they are near a location associated with a pass. In this situation, the user simply opens the app from the lock screen and presents it to the retail associate or customer service agent. Another benefit of Passbook is it can move more customers. Richard Crone, of Crone Consulting, reports the application can make store lines move 10-20% faster during peak hours.
(Users can choose to enable Automatic Updates and Show On Lock Screen)
There are plenty of excellent implementations of Passbook available to consumers. For instance, the Starbucks iOS application does a fantastic job of integrating with Passbook. After registering a card with their Starbucks account, a user can perform all plausible functions necessary to a customer using only their iOS device. The application allows users to reload and auto-reload (ie. reload $25 when the balance falls below $10) their card, refresh and transfer balances, view recent transactions and rewards, and most importantly, pay for their goods and earn rewards at Starbucks. Everything can be managed within the application.
(Users can reload and auto-reload their Starbucks cards)
Owing, no doubt, to the ingenuity of their design, Starbucks is having plenty of success in the mobile payment space. During an earnings call on January 23, Starbucks CEO Howard Schultz stated that mobile and gift card payments now account for more than 30% of Starbucks’ total share of U.S. payments. More than 10 million customers pay using the app and they process over a million mobile payments per week. Schultz also noted that Starbucks “process[ed] more than 40 million new Starbucks card activation[s] valued at (more than) $610 million in the U.S. and Canada alone in Q1, including (more than) 2 million new Starbucks card activations per day in the period immediately leading up to Christmas, and $1.4 billion of Starbucks card loads globally.”
While plenty of companies have excellent implementations of Passbook, there are two others that I’d especially like to point out. The Cineplex Mobile app and MLB.com At Bat are both gorgeous applications that let individuals purchase tickets within the application, and store them until showtime/gameday. The Cineplex Mobile app also conveniently lets the user store a Scene card in Passbook, which affords 10% off concession and earns the user points towards free movies. I personally can’t remember the last time I’ve needed anything more than my iPhone when going to a movie!
The Wall Street Journal has reported that Apple is looking to expand their mobile payment efforts so users would be able to pay for physical goods using their iOS devices via their existing iTunes accounts. Indeed, Apple has an enormous amount of dormant potential in this space. According to analyst estimates, the company has over 600 million users with credit cards on file as of late last year (for reference, PayPal has around 137 million active accounts). There are a few other recent developments that hint at Apple’s future mobile strategy. First, the debut of iBeacons (permitting device-based mobile transactions in-store) with iOS 7. Second, a recent patent filing that would allow devices to securely store payment information and then authorize purchases in a way that doesn’t convey any user sensitive data (much like the way Touch ID is used on the iPhone 5s). While much of this is speculation, there is no denying it is an exciting time in the mobile payment market and Apple has set themselves up to be major player in it.
Karson Braaten is a long-time software engineer at CollegeMobile. His latest baby at the company is the Space Stretch iPad app.