Passbook: Get Ready for Your New Digital Wallet

| Analysis

Apple's Passbook feature in iOS 6 and iOS 7 may not seem popular, but it's the fourth largest mobile commerce system in the United States, following Amazon, eBay, and Groupon. A fifth of iPhone owners are using Passbook even though it doesn't have a built-in payment system, and that may be exactly what Apple has planned next.

It's about time for Apple to turn Passbook into your digital walletIt's about time for Apple to turn Passbook into your digital wallet

Passbook is Apple's system for managing customer loyalty cards, boarding passes, tickets for movies and other events, gift cards, coupons, and more. Retailers, event organizers, airlines, and other companies can link their apps to Passbook as a single point for customers instead of forcing them to jump from app to app.

When Apple introduced Passbook with iOS 6, there was plenty of fanfare but little substance. Few companies took advantage of the feature, and Apple did little to show users how the system worked.

In the year following Passbook's introduction, however, more retailers have come on board, making it easier for consumers to see some value in the feature. Starbucks, for example, uses Passbook to let customers pay for drinks from their Starbucks Card accounts, and several airlines now offer Passbook-based boarding passes.

Large retail and restaurant chains use Passbook to help drive customer growth and retention, and it's helping drive brand awareness, according to a BI Intelligence study, despite the fact that it isn't a true electronic wallet.

Transitioning Passbook into a true electronic payment system may be the next step for Apple. The company already has 500 million credit cards on file and lets customers use their iTunes accounts to purchase products in its own stores, so its easy to see the company expanding that out to include other retailers as well.

If Apple takes Passbook down the electronic wallet path, don't expect to see the company adopt NFC, or Near Field Communication, technology. NFC has shown up in some Android-based smartphones as a way to make purchases without pulling out your credit card, but the technology hasn't taken off in the U.S. because there isn't a universal standard for the readers.

Instead, Apple will more likely use its own iBeacon technology. iBeacon is a Bluetooth LE-based system that can use your location to let you know when you've reached your seat at a show, remember which parking space your car is in, show special offers based on where you are in a store, and can also work as a system for wallet-free payments. Apple needs to get retailers on board, but that may not be an impossible task since the iPhone is so popular, and the company has shown that it can manage smartphone-based transactions in its own retail stores through the Apple Store app.

Assuming Apple does make the push for an iBeacon and Passbook based payment system, we'll probably see a hand full of companies come on board first, and once they show the system works others will quickly follow suit.

Wide spread adoption among retailers and iPhone owners is great, but what about the Android phone owners? Realistically, Apple would need to open its payment system to Android-based phones, too, just as it opened iTunes to Windows users. Retailers would expect that, too, since they cater to everyone with money and not just iPhone owners.

Apple has the pieces in place with Passbook, iBeacon, and now the Touch ID fingerprint scanner in the iPhone 5s. The next step is to bring all the parts together and get retailers on board.

The company has already shown consumers are willing to use their iPhones to make purchases, and Passbook is one of the most popular commerce platforms in the United States. Now Apple just needs to show it can manage that on a much larger scale.

Comments

Jarson

Anyone with the technical competence to know if the Passbook/iBeacon feature is fast enough to pay a rode toll at 70 miles per hour?

Jarson

Sorry, road toll for those who can’t get past my grammar.

adamC

Support for android would be a nightmare for Apple because of fragmentation.

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