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Apple makes a pass at mobile payments in its stores using Passbook app

October 17, 2012


Passbook will reportedly soon power in-store mobile payments for Apple

Apple’s much anticipated first step into mobile payments is finally here, with the company readying a way for customers in its stores to pay for purchases using the Passbook application.  

The mobile payments strategy will reportedly be introduced soon, enabling store associates to scan a bar code appearing in the Passbook app to authenticate a payment. Given the high price points of Apple products, if the strategy is a success, it will point to the potential of mobile payments to work for more than a $3 cup of coffee.

“Consumer behavior is changing and mobile payments are increasing in size,” said Wilson Kerr, vice president of business development and sales at Unbound Commerce, Boston. “The jump from a $3 cup of coffee to a purchase at an Apple store is a big jump and, if consumers adopt the use of Passbook for in-store payments, this could indicate a significant increase in consumer comfort with the use of mobile for payments.

“Apple is not only a retailer using mobile payments, they are the highest per foot revenue generating retailer in the U.S. using mobile payments,” he said. “Starbucks has proven that linking in-house gift cards to mobile purchases and owning the entire cycle can deliver a better, easier user experience – this is key.

“If Apple can do the same, it seems logical that they’d try to partner with some large retailers who’d like to try their line-busting methods in their own stores.”

Power of Passbook
The news follows much speculation about when and how Apple would enter into mobile payments.

Until recently, the expectation was that Apple would include an NFC chip in the iPhone 5 as a step toward enabling mobile payments.

However, when the iPhone 5 was introduced without an NFC chip,  focus shifted to the new Passbook app, which enables users to store tickets, coupons and various promotions from retailers in one central location for easy access when it is time to use them.

Available for only a short time, Passbook is quickly gaining steam with merchants.

What is new is that Apple is now reportedly making way for in-store mobile payments by adjusting its point-of-sale system and integrating Passbook into its iPod Touch EasyPay system. The program could launch as early as the end of this month.

The changes being made to the iPod touch POS will give store associates access to the cameras on the devices so they can scan Passbook bar codes.

Users will be able to link an Apple gift card to the Passbook and generate a bar code to pay for a purchase.

“What better way to demonstrate the power of Passbook than to allow consumers to load up Apple gift cards and use these for mobile payment in the Apple stores?,” Mr. Kerr said. “The fact that Apple has to retrofit their store employees with iPad cases that have the camera lens exposed – to scan the card codes on the app – is indicative of the fact that noting is simple in mobile commerce.”

Starting small
When Apple started equipping store associates with iPod touches that could be used by store associates to swipe credit cards and process payments in 2009, it was  one of the first retailers to leverage mobile technology in this way.

Today, mobile POS is an increasingly popular strategy for retailers such as Sephora, JCPenney, Sears, Urban Outfitters and others to eliminate long lines at the cash register and enable store associates to have a more personal experience with customers. In many cases, these retailers are using Apple devices such as iPod touches, iPhones and iPads.

While the use of a bar code in an app that can be scanned by a store associate to process a payment is similar to how the popular Starbucks mobile payments app works. However, Apple also has a significant number of consumers who have already opened digital payment accounts with it via iTunes.

“The use of a bar code is similar to Starbucks, but the fact that the bar code is linked to open loop payment methods like Visa and Mastercard accounts is more similar to the recent Square deal,” said Drew Sievers, CEO of mFoundry, Larkspur, CA. “The difference, of course, is that Apple has something like 300 million accounts on file, where as Starbucks and Square have far fewer.”

The program could conceivably be expanded to other retailers as all it would require is a bar code scanner.

The fact that it starts in a relatively controlled, low-consequence environment makes sense to me,” said Drew Sievers. “If they demonstrate success in their stores, then there will be an argument that it can work in other places as well.

“Most folks in the industry think that Passbook is a first step in Apple’s move into payments,” he said. “There is no hurry since mobile payments is nothing if not a slow-moving business.”

Final Take
Chantal Tode is associate editor on Mobile Commerce Daily, New York

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One Response to “Apple makes a pass at mobile payments in its stores using Passbook app”

  1. Daniel Isaac Says:

    I’m sure I’m not the first to say this but isn’t it a little odd that stories on this site aren’t mobile optimized?

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