Will Apple disintermediate banks from mobile payment?


For a while now, parties interested in mobile payment have been eyeing the space to see what will be the catalyst to take mobile payment to the next level. Apple, because of the iPhone's dominance in the mobile phone market and the loyalty of its user base, is viewed as having the potential to be that game changer.

So when Apple announced last week that with the forthcoming release of iOS 8 it will provide Touch ID APIs, some buzz immediately began about whether this would be that catalyst. Touch ID is used to unlock iPhone 5s and to pay for iTunes. The release of Touch ID APIs, means third-party developers can now use leverage the tool to offer quicker "touch" forms of authentication instead of entering passwords. Immediately, bloggers began suggesting that this would be great for mobile payments.

One of the complaints about some of the current mobile payments systems out there is that by the time users enter passwords into their mobile wallets, and then choose a card to pay with, possibly entering a password again, it would have been just as easy to pull out and swipe a credit card. A touch version of authentication might streamline that process, potentially overcoming some user reluctance toward using their phones to pay.

The number of parties lining up to offer mobile payment solutions is a testament to the amount of potential that different players in the industry see in mobile payments. (There is full rundown of the parties vying to become leaders in mobile payments, as well as an assessment of the mobile payment landscape in new ebook, Mobile Payments: The Race for the Future of Commerce, downloadable on the right-hand side of the FiereceFinanceIT Web page.) The amount of excitement over an announcement from Apple that is a long way from being a full-fledged working mobile payment solution is a further testament to the desire of certain corners of the market to see the emergence of a successful mobile payment solution.

There may be more to come from Apple, but for now, by making available a tool that is necessary to mobile payments, Apple seems to be saying that it is happy to host mobile payments on is phones, but it might not want to take full ownership of developing a mobile payment process. Mobile payment enthusiasts have enough information to be encouraged. Reportedly, less than half of iPhone users secured their phone when the only method available was password protection. Today, 83 percent of iPhone 5S users lock their phone with Touch ID protection.

"It is quite likely then that the implementation of Touch ID for a mobile payments service will similarly boost the number of users who make purchases through their iPhones," Nathanael Arnold speculates on Wall Street Cheat Sheet.