September 12, 2013, 4:55 PM

PayPal and Apple drop mobile payments bombshells

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However, Apple could create a mobile payments system like PayPal’s by enabling iPhone users to opt to connect iBeacon to their iTunes accounts, which store the users’ payment information. Apple boasts 575 million iTunes accounts, possibly the world’s largest collection of payment information, payments experts say.

“Apple could leverage iBeacon to execute a very similar strategy to what PayPal is doing, making their enrolled iTunes base available for mobile payment transactions at a wide variety of merchants,” analyst Oglesby says. “To accept these payments, merchants will have to update their own systems. At some point Apple will have to offer an API to merchants that allows merchants to integrate iTunes payment acceptance into their apps and POS systems. Apple is likely to do this in the future.”

Apple did not immediately respond to a request for comment.

The iPhone accounts for 13.2% of all smartphones worldwide, technology research firm IDC says. That figure can fluctuate significantly when new iPhones are debuted. Apple introduced two new iPhones this week, one with a lower than usual price of $99. Mobile experts believe the low-cost iPhone 5c is Apple’s attempt to gain market share in emerging markets across the globe.

Apple’s exclusion of an NFC chip in its latest iPhones is a kick in the teeth to NFC-based mobile payments. NFC enables two-way wireless communication between an NFC chip reader, built into a store cash register, for example, and an NFC chip, embedded in a smartphone, for instance. NFC has been hyped for many years as the technology that would link smartphones to store payment systems. But adoption of NFC is at a snail’s pace. Many industry observers have said when Apple finally embeds an NFC chip in iPhones, mobile payments would move into the mainstream. But Apple now has embraced Bluetooth Low Energy, not NFC.

“Apple is moving to kill NFC altogether by driving the market toward Bluetooth-powered microlocation technology,” Oglesby says. “Plus, the inclusion of fingerprint-recognition technology in the iPhone 5s could take mobile payments security and convenience to a whole new level. Bluetooth microlocation capabilities coupled with on-device biometrics could be nothing short of transformational for mobile payments. If they are executed well, we may finally have non-NFC payment methods that compete with and improve upon both the security and user experience associated with swiping a card.”

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