Imagine a shopping experience where you leisurely gather the items you want to purchase, then sashay up to the nearest clerk and check out using your favorite payment method -- without standing in line. No worries about whether your phone is compatible with the retailer's payment system, or whether the retailer has any type of e-payment platform at all. Sound futuristic? Well, the future is here -- and it's being brought to you by none other than tech giant Apple (AAPL 0.52%).
Many would agree that the mobile payments field is overcrowded at present, with too many choices that are being adopted by too few. I would suggest that there are really just two issues here, and that one problem may be that most players are trying to squeeze both into one application. One is the mobile wallet, in which consumers can store most things that are currently in their physical wallets -- such as store loyalty cards, tickets and passes, as well as payment vehicles such as credit and debit cards.
The other issue is at the retailer end of things, and encompasses exactly how customers are able to process their purchases with a specific merchant. This is where things get a little dicey. Some merchants support one method, such as Square, or, like Home Depot, offer payments using eBay's Paypal. There are many other methods out there, and it's a real mish-mash, with no one system being clearly better than another.
Passbook: Apple's answer to the digital wallet
Some commenters have noted that Apple seems late to the mobile payments game, particularly since the latest iteration of the iPhone was introduced sans near-field technology, which many consider necessary for digital payment domination. I would argue, however, that Apple has been quietly inserting itself into this sector for a while -- it's just that not many have really noticed.
Take Apple's version of the digital wallet, the Passport. This iOS 6 app takes care of most things people want to have with them when they leave home, such as store loyalty cards and coupons, as well as airline tickets and boarding passes. The app even has a nifty geo-location feature will automatically bring up the info you need as you approach the merchant's doorway.
There's only one thing missing, and that's payment capability. Even so, comparisons of Google (GOOGL -1.97%) Wallet and Passbook have put the latter on a high pedestal, noting that Google Wallet has many limitations, such as handset compatibility and merchant participation. Indeed, airlines such as American and United support the Passbook app, as well as retailers Target (TGT -0.54%), and Walgreens (NYSE: WAG). Delta Air Lines (NYSE: DAL) and Starbucks (NASDAQ: SBUX) are also rumored to be signing on soon.
A mobile payment model that retailers can get behind
On the merchant side of things, Apple has been taking aim at the actual checkout procedure, as well as transaction add-ons that complicate the sales process for vendors. To simplify matters, several retailers have jumped on the Apple Store method of transacting sales, substituting roving salespeople with iPads and iPods rather than stationary checkout kiosks with dedicated cash registers.
J.C. Penney (JPC -0.85%), for instance, has announced its plan to do away with cash registers and cashiers by 2014, opting instead to set up wi-fi networks and radio frequency identification to enable self-checkout and in-aisle mobile payments. Nordstrom (JWN -1.35%) has done away with checkout stands at many of its stores, giving sales clerks iPod Touch devices to transact sales, scanning customers' credit or debit cards without either party having to contend with lines at the cashier's station. At many Urban Outfitters (NASDAQ: URBN) locations, iPads have replaced registers, and clerks sport iPod Touches to conduct in-aisle transactions, as well.
The beauty of this system is twofold: Customers needn't worry about whether or not they will be able to avail themselves of the digital payment method used by their favorite merchants, and this type of system is less expensive and more convenient for retailers. According to Urban Outfitter's CIO, Apple devices are about 80% cheaper than cash registers, and swivel-mounted iPads allow customers to type in information like email addresses more quickly than clerks. For iPod Touch transactions, the card reader attachment can be swapped out for new payment methods that may come down the pike -- a much easier and less costly method of payment updating than obtaining new terminals.
Apple is on its way to dominating the digital payments industry
Time will tell whether or not Apple has nailed the e-payments and digital wallet industries, but I'm willing to bet that their systems will gain traction much more quickly than competitors and will soon dominate the field. Though Google Wallet 2.0 has seen increased usage since it began allowing the use of most credit and debit cards, Passbook has been quite popular from day one -- which is likely why Coupons.com has just introduced Passbook integration with 20 big retailers, including Macy's (NYSE: M), Barnes & Noble (NYSE: BKS) and Bon-Ton (NASDAQ: BONT).
As for store-based digital payments, the cost savings and convenience for merchants will certainly speed the spread of the till-less retail model -- not to mention the attraction of the line-free checkout system for shoppers. As far as I can tell, there isn't any downside to this type of e-payment system, and it looks as if Apple has quietly come up with a plan to blow its competition out of the water -- again.
