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What CIOs Need To Understand About Apple’s Passbook Service

October 8, 2012

Introduction to my article published in Forbes – October 8, 2012. Read the full article here

Written by Mark Scott, CEO of Northern Pixels, a mobile app business consulting firm.

The CIOs of the world’s leading banks and credit card companies have to be getting a little anxious about the direction of their mobile strategy as the stakes grow ever higher. Gartner’s tracking of mobile payments is expected to surpass $171 Billion this year and exceed $600 billion within four years. Meanwhile, Apple’s recent Passbook feature, a simple way to manage gift cards, coupons and tickets, hints at a looming “iWallet” mobile payment feature that could have considerable impact on shifting consumer payments market share.

With billions of dollars at stake, the mobile payment market today is still muddled with multiple players but no clear,  undisputed leader. There are two approaches in play. One uses embedded hardware in the form of a near-field communications chip (NFC) within smartphones, which requires an NFC-enabled merchant device to handle the transaction. The other is an app-based cloud transaction approach. The recent release of the iPhone 5, without an NFC chip, and the launch of iOS 6 with the new Passbook feature are signaling Apple’s preference for the cloud approach.

Three specific things about Apple are fueling banker CIO anxiety: existing user base, integrated convenience and consumer influence. With a reported 400 million active iTunes account and 315+ million mobile devices, Apple has major home field advantage to position itself ahead of virtually any upcoming solutions. To provide context, the U.S. as a whole has an estimated 176 million credit cardholders. As banks and credit card companies struggle to develop an adoptable mobile solution, Apple continues to build a powerful user base day over day.

Ultimately Passbook is designed to enhance the ease of transactions – which all merchants and brands like – and it’s an obvious precursor to connecting mobile payments.  Apple controls the hardware and the mobile OS, and now with Passbook, it provides brand app developers the ability to link their products to a centralized and easy management of gift cards, coupons and tickets. It’s strategic multi-step approach, and connecting multiple brands to its loyalty management infrastructure will make it easier to move to the next step of connecting them to the transaction system.

Read the full article here

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