Apple's Deal with Major Credit Cards Companies Has Hidden Value

It's one thing for a company that makes great hardware to move into wearables. It's quite another to delve into mobile payments. But the two are linked in ways we don't yet appreciate.


Whenever Apple sees a market opportunity for hardware, whether it's an iPod or an iWatch, it's frequently confronted by marketplace issues that block its ability succeed.

Other companies, in my view, tend to leave the issue to the customer and, instead, focus on features that will distract the customer from underlying issues, such as security.

Apple, on the other hand, knows that its customers tend to view the Apple ecosystem as a coherent whole. Music is downloaded to iTunes, then synced to an iPhone. Photos are shared via iCloud. Find my iPhone on an iPad mini can locate a lost or stolen sister device. Yosemite Macs can use an iPhone as a Wi-Fi hotspot. The list goes on.

It's All About Sales

In concert with all that, it's been an irritation for years that major credit card companies have been slow to adopt the more advanced technologies used in Europe, smart credit cards. If Apple can use its technology and market clout to effect a favorable change in the technology that helps its customers enjoy the secure and fruitful use of its iPhones for financial transactions, the company is going to sell a whole lot more of them.

All of this depends, of course, on a solid infrastructure based on sound security. Apple, more than any company I know, understands that great security in its mobile products will lead to more sales of its mobile products. A smartphone is no longer just a telephone. It's emerging as our credit card, our ATM, and our remote banking portal.

Small but crucial differences in product design can often go unnoticed and the implications glossed over. For example, the iPhone has hardware encryption. Some other smartphones do not. A passphrase encrypted iPhone is very secure, provided the owner doesn't jailbreak it.

In the end, it doesn't matter if a smartphone has this or that feature for the sake of thrilling the customer—or for comparison chart oneupmanship. What matters is whether customers will embrace a next generation smartphone that allows them to have relative confidence that in our nasty, dangerous world of hackers out there, the iPhone will give them the best shot they can possibly have at evading a financial loss.

The genie is out of the bottle. There's no going back now. Reverting to a 1990s flip phone in the (comical) style of Leroy Jethro Gibbs (NCIS) isn't the answer.

The iPhone in Transition

The iPhone 6 will be a transition smartphone. In other words, in the past, companies that make smartphones have added feature after feature, cameras, magnetometers, gyroscopes, GPS, you name it, and all these features have provided great new functionality and features, but they've also opened the door to the black hats. In the future, smartphones will become financial instruments—with even greater risks.

Starting with the iPhone 6, there is more than privacy at stake. Some smartphone users will claim they don't care if a hacker steals their sister's phone number. But take their money, and they tend to get really angry.

The deals that Apple has struck with American Express, Visa and MasterCard, aren't just an idle excursion by a hardware company into exploratory financial services. Rather, it's Apple's unique way of stepping into a market that has certain problems that could stymie Apple's future growth and developing an elegant consumer solution.

I believe Apple intends to invoke its serious engineering skills to bring its own unique brand of ease of use and transparent security to the whole financial affair. That's a foundation Apple can take to the bank in the long term when it starts selling the iPhone 6.

This personal, financial security initiative on the iPhone is something that other smartphone companies will certainly try to mimic.  How well they succeed will be judged by the consumers.

All this is something to keep in mind as you watch Apple's September 9 event. Oh, and by the way, Apple will generate some handsome revenue from this service. We won't begrudge them that.