Apple Inc. (NASDAQ:AAPL) is rumored to be getting into the payments industry with the release of the iPhone 6. So far, consumers have been hesitant to use their smartphones to buy items at the point of sale. However, Stifel analysts think Apple may be the one company that can convince users to adopt the technology.
Apple’s brand may be enough
In a report dated Sept. 2, 2014, analysts Christopher C. Brendler and John Davis said Apple’s brand just might be good enough to conquer barriers to widespread adoption of mobile wallets. They note that the company’s consumer brand is trusted and powerful and that Apple has “next gen security” and can easily monetize the credit card database it has through iTunes. In fact, consumers may not have to do much to utilize Apple’s mobile payments service.
The Stifel team suggests that if Apple does indeed roll out a payments service as expected with the iPhone 6, the service will link users’ accounts to an iPhone wallet. They expect it to use both fingerprint and near field communication authentication at the point of service to complete transactions. In addition, they expect it to have next-generation security through cooperation with the major credit card networks.
Online versus offline payments opportunities
The analysts expect Apple to target physical brick and mortar retail instead of online. They note that websites already offer PayPal and several competitors, including Google Inc (NASDAQ:GOOGL) (NASDAQ:GOOG), Amazon.com, Inc. (NASDAQ:AMZN), Visa Inc (NYSE:V) and Mastercard Inc (NYSE:MA).
They add that Apple probably sees a much larger offline opportunity because consumer adoption remains negligible. They note that PayPal, Google and other online payment services providers don’t really solve the problems posed by offline rather than online shopping. Because of the nature of offline shopping, plastic credit and debit cards are already “fast and convenient enough” and already in widespread use among consumers.
The Stifel team believes that Apple may be following the right strategy—in spite of the current lack of information about this rumored payments service. They believe that if the company works closely with payment networks, its strategy will benefit from wide acceptance through the use of near field communication.
They also believe that Apple’s “next-gen security” will resolve consumer worries about the safety of their payment information, particularly because of the breach of Target Corporation (NYSE:TGT)’s payments systems. When combined with fingerprint authorization and the use of tokens, they expect Apple to focus consumer attention on the security of its payments solution.