Apple Taking Small Bites Of Mobile Payment

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 beneath the surface.

Many mobile-payment systems, including Google Inc.’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 becomes widespread, NFC simply will be the icing on a cake that Apple Inc. 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 smart- phones, 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 shapes and sizes along with operating systems that carriers often tweak according to their 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 it launches a new version). That allows for a uniform experience across the entire product line and a more practical foundation for a payment system, experts say. Apple did not respond to inquiries made by phone and email. 

Apple retail stores in Paris and London are using a device from Ingenico SA that slips over iPhone and iPod Touch devices to accept chip-and-PIN transactions and 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 designed its reader for small merchants, but other hardware makers are bringing Apple’s devices into established retailers.