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Apple’s Passbook is the Gateway App to Mobile Payments Adoption
June 21, 2012
Mercator Advisory Group
Last week Apple Inc. announced that it will include a mobile wallet in its new mobile operating system coming in the fall. The application is called “Passbook,” and it is designed to store closed-loop payment cards and things like movie tickets, boarding passes, and loyalty cards.
What is interesting about Passbook is that it makes no mention of offering open-loop cards of any kind, be they prepaid, debit, or credit. While that is no doubt in the design plans, Apple seems to have recognized that smartphone users are more likely to become mobile payments users when they feel like the risk is limited and when they are prompted to pay with their phones.
Closed-loop cards are an intuitive payments leap for the customers of retailers that load their cards into the phone. The cardholder understands where and how the card can be used because they believe that the Starbucks card is for their morning coffee and that the retailer adopted the technology because it is able to accept payments that way. There is no acceptance ambiguity.
The retailer benefits because the Passbook can eliminate plastic, speed up transactions, and direct customers to a low-cost method of payment. Having the cards on a mobile phone may also prompt reloading by cardholders because now they have an easy way to access and use the cards.
Finally, by opening cards when a Passbook holder walks into the store, Apple now is encouraging what may otherwise be a casual browser to become a buyer. With some cards, Starbucks or Dunkin Donuts being examples, this will likely not be necessary, because the customer has walked in with an intent to buy. Few people browse doughnuts and then walk out empty handed. But for other merchants, opening that card will be like opening a license to spend, encouraging consumers to buy. A recent blog
by Victoria Finkle, of American Banker, talks about how this kind of technology can influence behavior.
While there are still some questions that need to be answered, the Apple Passbook is likely going to be the gateway app for many people into the world of mobile payments. It’s future success will depend on merchant adoption, and its ability to enable split tender payments and rewards redemption from loyalty cards.
Contact Ben Jackson
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