Apple aims to change the game with mobile payments

Apple Inc is jumping into the mobile-payment market, just as retailers upgrade their cash registers to be more secure and ready to receive wireless transactions.

Chief Executive Officer Tim Cook is planning to unveil new iPhones, wearable devices and a mobile-payment system on Tuesday, people with knowledge of the matter have said. Visa Inc, MasterCard Inc and American Express Co, as well as banks and retailers, were forming partnerships with Apple to let shoppers pay with iPhones, and possibly using a device worn on the wrist, a person familiar with the plans said this week.

Apple is targeting a market that is projected to jump to $90 billion in 2017 from $12.8 billion in 2012, according to Forrester Research. The dynamics are changing now, as most credit-card issuers push US merchants to upgrade their payment terminals to accept chip-based debit and credit cards. Those are more secure and usually capable of handling near field communication, or contactless, transactions. New iPhones would also include the wireless feature, the person said.

As Apple did with the iPod and iPhone, the Cupertino, California-based company isn't inventing a new market. By combining existing technologies in an easy-to-use package of hardware, software and services, Apple is betting that it can further cement its products into the daily fabric of customers' lives.

"If Apple introduces it now, while retailers are upgrading, there could be an installed base of NFC terminals that would make it quite useful by next year," said Gil Luria, an analyst at Wedbush Securities Inc in Los Angeles.

Hard business

While Google Inc, EBay Inc's PayPal and Softcard, formerly known as Isis, have introduced mobile-payment services, they haven't yet become mainstream. Walmart Stores Inc, Target Corp and dozens of other retailers have also banded together to create a mobile-payment network called CurrentC, which is being piloted in some US locations and will roll out next year.

"Isis, Google, PayPal - those are the guys that will be most impacted by this," said Chris Gardner, co-founder of start-up Paydiant Inc, which helps retailers build mobile wallets.

Apple's move into mobile payments coincides with some initiatives that have already started to gain traction among consumers. Starbucks Corp now processes more than 15 per cent of its US sales through its mobile app. Softcard has 20,000 new app activations daily, according to the company.

"Payments is a hard business," Anuj Najar, a spokesman for PayPal, said of Apple's entry into the market. "You need trust for a transaction to work."

Tom Neumayr, a spokesman for Apple, and Anaik Weid, a spokeswoman for Google, declined to comment on Apple's plans.

New markets

"It's in many ways overdue - it moves the market in the right direction and it would endorse the direction that we have held," Jim Stapleton, a senior vice-president at Softcard, said in an interview. "Our biggest competition is the leather wallet. We are trying to shift consumer behaviour and habits."

Just as with the iPod, iPhone and iPad, which spurred the emergence of entirely new product categories and services, Apple is betting that it can foster a mobile-payment ecosystem that will fuel demand for its gadgets. "The real reason Apple is doing this is to create a killer shopping experience that its rivals cannot replicate," said Gene Munster, an analyst at Piper Jaffray. "If having an iPhone means getting out of stores faster and making it easier to keep track of receipts, it is going to be good for Apple's hardware sales."

APPLE'S PIE

What's new?

Visa, MasterCard and American Express, along with banks and retailers, are forming partnerships with Apple Inc to let shoppers pay with iPhones and a device worn, possibly, on the wrist

Projected market:

The size of the mobile-payment market, at $12.8 bn in 2012, is likely to jump to $90 bn by 2017, according to Forrester Research

The trigger:

Apple rides on the changing dynamics in the US with many credit-card issuers pushing merchants to upgrade their payment terminals to accept chip-based debit and credit cards

The ecosystem:

Apple hopes that it can foster a mobile-payment ecosystem that will fuel demand for its gadgets