This year's iPhone 5S is widely expected to include some type of fingerprint sensor, leveraging Apple's (NASDAQ:AAPL) acquisition of AuthenTec last year for $356 million.

Rumors up until this point have suggested that Apple is integrating a fingerprint sensor directly into the iPhone's home button. KGI Securities analyst Ming-Chi Kuo, who boasts a strong track record with Apple rumblings, has predicted as much. Well, a freshly public patent application shows that Apple might have something better up its sleeve.

Apple might be integrating the fingerprint sensor directly into the display itself. Integrating into the home button was already considered an important point of differentiation that rivals would have trouble matching, but integrating into the display adds a whole new level of distinction. It also allows a wider range of use cases, as third-party apps would have more ways to leverage the technology.

The patent was originally filed for in January of this year, and AuthenTec co-founder and current Apple engineer Dale Setlak is credited as the inventor.

It's an innovative approach that no company has attempted on this scale before. The possibility gives further credit to prior reports that Apple is facing challenges with manufacturing yields related to fingerprint-recognition chips and LCD driver circuits. The iPhone 5 also faced early supply constraints because of display bottlenecks.

The patent application will only reinforce speculation that Apple's entry into the mobile payments industry is imminent. Apple is now up to 575 million active iTunes accounts with credit card data on file, and Passbook is already taking off in popularity among merchants, even without a uniform payment method.

Primary mobile rival Google is also regrouping its own payment strategy, launching a fresh round of promotions to spur developer and merchant adoption while shuttering Google Checkout, and unifying under the Google Wallet brand. The expanded Google Wallet service hopes to also put heat on eBay's PayPal on the broader Web. Meanwhile, PayPal is on Apple's side in its possible crusade to kill the password in favor of biometric security.

Tim Cook believes the mobile payments market remains in its "infancy," so the Apple CEO has clearly put some thought into it.

Fool contributor Evan Niu, CFA, owns shares of Apple. The Motley Fool recommends Apple, eBay, and Google. The Motley Fool owns shares of Apple, eBay, and Google. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.