2 Reasons Apple Will Disrupt Mobile Payments

The mobile wallet is a bit of an enigma. Companies want to offer the service but so far have been slow to present a product that has caught fire in the market. Consumers want to use it but fear the technology is not up to snuff in the security department. Apple (Nasdaq: AAPL  ) has been keenly aware of this concern, so much so that it has been seen as a bit of a laggard when it comes to mobile payments. In just a few short weeks, however, all that seems to have changed.

The recent decision to acquire AuthenTec (Nasdaq: AUTH  ) , a mobile-security company that produces fingerprint sensor chips, indicates that Cupertino is not just waiting around to see how others play the mobile-payment game before they jump in. If no other company outbids Apple, AuthenTec will meld nicely with a couple of near-field communication patents that the company received this year.

One, for an iTravel travel and reservation management service, showed an NFC-enabled iPhone in sketches submitted with the patent application. The other would allow users to control all manner of components also embedded with a NFC chip, such as an Apple TV, with that iPhone. What else could an NFC-enabled iPhone do? Process payments, of course.

Apple mobile wallet: just a question of "when"?
Add to the mix the fact that AuthenTec offers a sensor specific to mobile wallets, and the evidence overwhelmingly supports the introduction of an Apple-based wallet -- possibly Passbook, which currently doesn't possess payment capabilities -- sooner, rather than later. So, which competitors need to worry about this scenario?

Well, all of them. The truth is, however, that eBay's (Nasdaq: EBAY  ) PayPal is the only rival that will present a challenge. Although Google has offered its own product for more than a year, it has been slow to catch on with consumers, something the Internet giant hopes to fix with its upcoming Google Wallet 2.0. Isis, the mobile payment system supported by Verizon Wireless (NYSE: VZ  ) and AT&T (NYSE: T  ) , is being rolled out in test markets this summer but has found getting banks to sign on with the system a slow process.

PayPal is the one to beat, and its recent acquisitions include card.io, a company that pioneered technology to use a smartphone's camera to record card information, and RedLaser, which allows smartphone swiping of barcodes to conduct purchases as consumers shop. Clearly, PayPal is planning to continue its domination of the mobile-payments field, and Apple will have its work cut out for it.

Fool's take
I have suspected for some time that Apple was actively working on the security issue regarding mobile wallets, and it looks as if the company has it covered. Rumors abound that an iPhone with NFC technology built in is just around the corner, and it's definitely looking more believable now. With the NFC payments market expected to top $180 billion within the next five years, it was only a matter of time until Cupertino entered the fray. When Apple enters the space, I predict that there will be a clash of the titans as PayPal fights to maintain its lead, and lesser rivals fade into the background.

Keeping a constant eye on Apple as this new project plays out is the best way to gauge just how valuable this new market is to you, the investor. Want an easier way to get to know Apple? Check out our premium report, which will give you an in-depth look at Cupertino -- and provide a full year of updates. Want more? Get access.

Fool contributor Amanda Alix owns no shares in the companies mentioned above. The Motley Fool owns shares of Google and Apple. Motley Fool newsletter services have recommended buying shares of Apple, eBay, and Google and creating a bull call spread position in Apple. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days. The Motley Fool has a disclosure policy.


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  • Report this Comment On July 31, 2012, at 2:57 AM, fortunategromit wrote:

    I think Apple could disrupt mobile payments but I think NFC has already been rendered obsolete by Paypal's solution.

    If I can go to Home Depot for a few sheets of drywall or other cumbersome items and not have to fumble in my pockets for my wallet or phone it makes things more seamless.

    NFC does have the 'cool' factor in that it gives the chance for those that care the chance to flash their phone and tap it, but if Paypal's solution takes hold with other merchants, I think it will be difficult to convince them to invest the money in changing their POS to accommodate NFC. Plus I think consumers as a whole will think "Why bother, my credit card works ..." so there's the challenge of consumer adoption, which Paypal is now facing too.

    But yes, if NFC were to become a standard in the payments arena, I agree that it would be Apple that blazes the trail. Thanks for the article!

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