Apple is developing an expanded mobile payments solution to enable it to further take advantage of the more than 575 million credit card numbers it has on file from registered users of its iTunes store.
The Wall Street Journal reported Jan. 24 that Eddy Cue, Apple’s senior vice president of Internet software and services, has met with several executives in the payments industry to discuss its plan, citing people with knowledge of the situation.
Apple has also moved Jennifer Bailey—whose LinkedIn profile says she’s vice president of Apple’s worldwide online stores—”into a new role to build a payment business within the technology giant,” The Journal added.
Apple was expected to include Near-Field Communication (NFC) technology in the iPhone 5, and the inclusion of the technology in the iPhone 5S was a foregone conclusion. In both instances, however, Apple refrained from including the technology that Samsung and others in the mobile industry have adopted to facilitate their entry into the mobile payments market, leaving all to wonder about its plans.
Apple iTunes users can use their accounts, which are linked to a credit card, to pay for music and movies in the iTunes store, and many apps allow users to make purchases with their Apple ID. But Apple has yet to offer users a way to make in-store payments using their iPhones.
Apple’s Secure-Payment Patent
The Journal report adds color to a Jan. 16 patent Apple filed with the U.S. Patent and Trademark Office for a “method to send payment data through various air interfaces without compromising user data.”
First noticed by Apple Insider, the patent covers a two-step process for conducting a “wireless commercial transaction that is both user-friendly and secure.”
Apple explains: “Currently, payment information such as credit card data in mobile devices is sent directly from a secure element (SE) located in the device such as a mobile phone through proximity interfaces, such as [NFC] without an associated application processor (AP), such as an application program in the device, accessing the payment information.”
It continued, “Preventing the AP from accessing the sensitive payment information is necessary because current payment schemes use real payment information (credit card number, expiration date, etc.) that can be used to make purchases through other means … and data in the AP can be intercepted and comprised by rogue applications. Thus, there exists a need for a secure method of executing a commercial transaction that is both secure and user-friendly.”
Apple’s solution includes a purchasing device, such as a phone, establishing a secure link over a first wireless technology, or “air interface,” such as Bluetooth. Then, a secure link is made between the phone and the point-of-sale device. And finally, a second air interface, different from the first (so, NFC, for example, if Bluetooth is responsible for the first connection) is used to then conduct a secure transaction.
While it’s unclear exactly what Apple means by a “secure element,” the language, as Apple Insider points out, is in keeping with Apple’s description of its Touch ID security system, which verifies a user of the iPhone 5S via fingerprint. Apple has explained that Touch ID doesn’t store fingerprint images on the phone, though it does encrypt the information within a “secure enclave” in the phone’s A7 processor. Were someone to hack into the phone, the thinking goes, the secure enclave within the A7 would still be locked off.
Apple In-Store Technology
Also likely to figure into Apple’s in-store payments strategy is its iBeacon technology, which it launched in 254 of its U.S. retail stores Dec. 6. Using Bluetooth, iBeacons seek to offer an improved, site-specific, shopping experience, with the ability to greet a customer when he walks in a store, offer coupons when he’s in the relevant department or aisle, and offer a reminder of in-store items that he’s looked at online.
The mobile payments market has been slow to blossom, which is likely due, in part, to Apple’s absence. Forrester expects the mobile payments market to reach $90 billion in 2017, expanding at a compound annual growth rate of 48 percent from $12.8 billion spent in 2012.
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