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Is Apple missing the boat with mobile payments?

The Passbook app from Apple

Mobile payments are growing quickly and yet one of mobile’s biggest players – Apple – is not taking a leadership role, at least not yet.

The amount of money at stake in mobile payments is potentially significant as consumers use their mobile phones for a growing array of every day activities, which is why banks, credit card companies, wireless carriers, technology firms and retailers are all diving into mobile payments. Apple, on the other hand, has reportedly decided to take its time in mobile payments after considering a variety of options, according to a recent article in the Wall Street Journal.

“Apple is smart to watch the first few plays in the mobile payment game from the sideline,” said Wilson Kerr, vice president of business development and sales at Unbound Commerce, Boston. “It is a complex space, with many moving parts and big players spending big money.

“If Apple is waiting, it is for a very good reason,” he said. “I’d be willing to bet it’s to see how fast NFC gains traction and whether consumers feel comfortable reaching for their phone, rather than the credit card they already carry.”

A conspicuous absence
Mobile payments is already big business for some and is expected to continue to grow as consumers increasingly use their mobile phones to pay for purchases in stores or for their part of the bill at a restaurant and make online purchases. PayPal expects to process $7 billion in mobile total payment volume this year while coffee house chain Starbucks said in April that it had processed 42 million payments via its mobile application since the app’s launch.

While some are reaping the rewards of having a mobile payments solutions others are not faring as well.

For example, Google reportedly is struggling to gain acceptance for its mobile wallet.

There are also a growing number of third-party mobile payment apps such as LevelUp but none have gained significant traction with consumers. Additionally, Isis, the mobile wallet supported by several wireless carriers, is expected to launch two pilot programs this summer while Microsoft will release a new digital wallet with Windows Phone 8.

In this competitive environment, the absence of a significant play from Apple is conspicuous but not without reason.

According to the Wall Street Journal article Apple has considered a variety of mobile options, including embedding payments into the iPhone, building its own payment network, launching an NFC wallet or teaming up with an existing payment platform.

The company eventually decided against any of these moves because of the complexity of mobile payments as well as the fact that NFC appears to be several years off before it gains any meaningful traction with retailers and consumers.

Instead, Apple went with Passbook, a new app the company introduced last month and which is scheduled for release later this year.

The app brings together a user’s loyalty cards, tickets and coupons but does not link to a user’s credit cards. The expectation is that the app could lay the groundwork for a more significant mobile payments play.

The right moves
However, in the short-term, it appears that the spotty record so far for mobile payments has Apple taking its time and trying to insure that any move it makes is the right one.

“The big question is whether or not consumers will want to pay for physical items with a smartphone,” Mr. Kerr said. “Any innovation needs to solve a problem.

“After all, how hard is it to pull out a credit card and swipe,” he said.

There is also the possibility that retailers will create their mobile payment systems and manage them internally, a strategy several larger retailers are reportedly working on.

The decision to take a wait-and-see approach in mobile payments is not surprising coming from Apple, which has reputation for taking its time before entering developing technology markets and then making a big splash with disruptive solutions.

“Apple certainly builds innovative products, but mobile payments is not a product – it is a service,” Mr. Kerr said.

“The industry is abuzz about mobile payments and Starbucks is doing a great job with their white label solution, but the real question is when consumers will be ready and willing to start using a mobile wallet, generally,” he said.

Apple is already participating in mobile payments with its iTunes store, which has approximately 400 million credit-card accounts registered.

As a result, once Apple does decide to enter mobile payments in a big way, it could quickly become a significant player.

“With their iTunes store humming along smoothly and generating $8B+ annually, Apple is very well positioned, if and when they decide to make a move,” Mr. Kerr said.

Final Take
Chantal Tode is associate editor on Mobile C0mmerce Daily, New York