Apple Inc plans to turn its next iPhone into a mobile wallet through a partnership with major payment networks, banks and retailers, according to a person familiar with the situation.
The agreement includes Visa Inc, MasterCard Inc and American Express Co and is set to be unveiled on Tuesday next week along with the next iPhone, said the person, who asked not to be identified because the talks are private.
The new iPhone should make mobile payment easier by including a near-field communication chip for the first time, the person said. That development, along with Touch ID, a fingerprint recognition reader that debuted on the most recent iPhone, would allow consumers to securely pay for items in a store with the touch of a finger.
While companies such as Google Inc have created ways for phones to make payments in a physical store, US retailers have been slow to adopt the technology, limiting its use by consumers, Creative Strategies LLC analyst Ben Bajarin said. That could change when Apple enters the market because iPhones have the largest market share in the US, he said.
“Love it or hate it, Apple drives a lot of standards in the industry,” Bajarin said in an interview. “They are the mover in these markets. When they do something, the industry seems to follow.”
A spokeswoman for Apple, Trudy Muller, declined to comment, as did a spokesman for MasterCard, Jim Issokson, and a spokesman for American Express, Mike O’Neill. Representatives from Visa did not immediately respond to a request for comment.
For Apple, the drive to create a mobile wallet is to keep users within its ecosystem, thus creating more loyalty to its brand and demand for its products, Bajarin said.
“It’s about retention, solving and adding features that keep your base engaged and keeping them loyal,” Bajarin said.
Apple’s move is also aimed at generating more revenue from about 800 million iTunes accounts, Crone Consulting LLC chief executive officer Richard Crone said.
Until now, iTunes accounts have been used only in Apple’s marketplace, which is tiny compared to the vast retail market, Crone said.
If Apple’s mobile wallet takes off, it could open up new possibilities as a marketing platform by generating advertising revenue from consumer brands wanting to reach shoppers while in a store. Crone’s firm estimates that a frequently used mobile wallet application could generate about US$300 each year per user from advertising.
Apple’s success would largely depend on the acceptance of the retail industry, which has been wary of handing over data gained during a transaction to a third party, Crone said.
A group of chains, including Wal-Mart Stores Inc, formed a company in 2012 to build a mobile-payment system that has yet to release a product.
“There’s huge potential with Apple having a market-defining opportunity,” Crone said. “[However], there’s lots of moving parts in payment that make the deals they did with artists and Hollywood for iTunes look like child’s play.”