Mobile OS Vendors Continue to Invest in Mobile Payments

In the last several weeks, two leading mobile operating system (OS) vendors moved into the mobile payments space. Apple announced its new mobile wallet Passbook that will debut with iOS 6 this fall. Microsoft quickly followed with its announcement of the new Microsoft Wallet mobile payment app, also due out this fall as a part of Windows 8…and Google continues to revamp Google Wallet

It’s clear that Apple and Microsoft are making a big move into new territory. Neither company is waiting for an ecosystem to form before they jump in. They’re not waiting for co-ops like the Isis partnership, banks or brands. They want to make sure that they’ll become a key component of the value chain.

While on the surface it appears the three major mobile platforms now have a mobile wallet capability, as always the devil is in the details. Each vendor has taken very different approaches to create a mobile wallet service within their OS, particularly in how they authenticate payments.

Google’s wallet is device-centric, with a secure element embedded within the phone itself being used to validate payments. So if you want to access the service, you can only do so from a handful of devices. Microsoft has adopted the SIM-centric model that has been promoted by the GSMA.

With Google’s model, the Operator can be excluded from the value chain, but with Microsoft’s the operator is required for the provisioning of the SIM.

Apple, as they often do, has taken a very different approach. Apple’s Passbook enables third parties to push barcode-and QR code-based loyalty cards, store cards and boarding passes in to a single location on the iPhone. So the British Airways boarding pass for your flight tomorrow, or your existing Starbucks card barcode, could be stored in you Passbook.

Apple’s Passbook is, in many ways, more remarkable for what it doesn’t do. Whilst British Airways could update that boarding pass if the gate changes, you can also use the pass to confirm the time of the flight. And while your balance on the Starbucks pass can update, you can’t top up your account from within Passbook. To do either, you would need to use the existing iPhone app and not Passbook. 

Depending on your definition, you could argue Apple’s solution is not really a mobile wallet, as it purely stores passes, and has no payment capability of its own. Apple seems to agree, as the product name is Passbook and not (say) iWallet. 

However, while Passbook is limited, it is an incredibly simple version of any existing service that uses barcodes or QR codes to push passes in to Apple’s Passbook. And there is no cost for third parties to do so.

This is the start of the bid from the mobile OS vendors to say that they’re going to control the wallets. Operators are making a clear play for a slice of the pie, but at present only the Microsoft wallet has a clear role for operators in the value chain. With the approach that Google and Apple have taken, the only thing mobile payments need from operators is really the connectivity. Again, it’s all coming down who is going to own that relationship with the customer.

Take Apple. When it launches Passbook, it will already have worldwide distribution. And though the current version has no payment capability, Apple has the credit card details of 400 million customers already banked in the iTunes Store, to which it could easily link to this. I can’t imagine that Apple won’t leverage that advantage in some way down the road.

Watch this space over the coming months, as this looks like it is just about to explode…

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