The iPhone 5s lets a consumer sign on to iTunes with a touch of her finger.
Katie Evans , Managing Editor, International Research
Speed, security and price. Those are the three main features of Apple Inc.’s new iPhones, the company says. Apple’s moves today with the iPhone and its new iOS 7 mobile operating system could benefit retailers in mobile commerce, some analysts say.
Exactly three months from the day that Apple announced its new iOS 7 mobile operating system, the company has unveiled two new versions of its iPhone at a much-anticipated press conference—a more advanced and expensive iPhone 5s and a less expensive option, the iPhone 5c. The 5s will cost $199 for a 16-gigabyte version, $299 for 32 gigabytes and $399 for 64. The 5c will sell for $99 for a version with 16 gigabytes of memory and for $199 for one with 32 gigabytes. Both require a two-year contract to lock in those prices and will be available for preorder on Friday, Sept. 13, and for purchase on Friday, Sept. 20.
Apple’s new iPhone 5s will feature a 64-bit A7 processor, which will make the device five times faster than the current iPhone 5 A6 processor, Apple says. That will enable shoppers to access m-commerce sites and apps more quickly, which could boost the performance of sites and apps, mobile experts say. Mobile and web performance firm Keynote says every gain in performance translates to a gain in mobile conversion.
The 5c replaces the current 5, and beyond some cosmetic changes (the “C” stands for color—as the device is offered in several, from pink to yellow) and a larger battery, the main difference is the lower price. When Apple launched its predecessor, the iPhone 5, it started at $199 with a two-year contract.
The less-expensive option could further drive smartphone adoption, says Brian Klais, founder and president of Pure Oxygen Labs, a mobile marketing consulting firm. “Lower cost of entry will translate into more mobile traffic and commerce this season,” he says.
On the technology and commerce front, the big buzz on today's announcement is the addition of a fingerprint reader, or what Apple coins Touch ID, in the 5s. This can replace the passcode many iPhone owners use to unlock their smartphones; but, more important for app developers such as retailers, is Apple’s announcement that it will make the technology available to take actions in apps. The statement was general but it suggests that the technology could be used for app or mobile web payments.
In 2012, Apple bought AuthenTec, a company that provides biometric fingerprint recognition technology, and rumors have swirled since regarding how Apple planned to use the technology.
Klais says the fingerprint technology could drive payments if Apple enables app developers, such as retailers or operators of mobile payments apps such as eBay’s PayPal Here, to access the fingerprint image for authentication and payment.
Peter Jarich, vice president, consumer and infrastructure, for Current Analysis Inc., a mobile hardware and telecommunications consulting firm, says the finger authentication technology may make consumers feel more secure making purchases via their smartphones.
“It’s almost impossible to separate out the issues of security and commerce,” says Jarich. “The idea that your phone could be stolen or used by someone else has a natural chilling effect on any interest in using that same device to regularly buy things.”
Still, he adds consumers have in the past have not adopted fingerprint security technology. “On the one hand, it’s a clear step in adding another secure authentication method,” he says. “On the other hand, I’m not sure how many people will use this. To date, implementations haven’t always been that good. My experience is that they lend a feeling of security, but that they’re not reliable enough to get used consistently.”
David Eads, CEO of mobile consulting firm Mobile Strategy Partners, says security is a top concern among those consumers who do not use their phones for payment-related purposes.
“The fingerprint reader is huge for payments, financial services and health care,” he says. “When asking consumers who have chosen not to use mobile banking why, by far the most common response is ’security,’ with 49% of respondents.” He says that figure, from the Federal Reserve, has been relatively consistent since 2007. What’s more, in 2009, Javelin Strategy and Research did a survey on mobile and biometrics and found fingerprint recognition as the preferred mobile identification method (61%) followed by iris scan (27%) and voice recognition (24%).
Rick Oglesby, senior analyst and consultant at financial services research and advisory firm Aite Group, says consumers may use the feature to pay in stores, but only if it is quick and easy. For example, he says trying to pay with a digital wallet at a store via payments apps like Square Wallet from Square Inc. can sometimes be “a slow and painful experience.”
“A fingerprint reader can theoretically speed that up and potentially increase security above and beyond signature and PIN-based schemes,” he says. “If properly utilized and if adopted by consumers, the fingerprint reader could be transformational for mobile commerce apps that include payment.”
Eads points out that the fingerprint reader is already in position to speed a lot of mobile commerce—through Apple.
“It shouldn’t be overlooked that iPhone users can now use their fingerprint as their iTunes password,” Eads says. “This lets you use your phone for mobile payment using biometrics. For example, if Apple were to let merchants pay using iTunes like Amazon and PayPal do, shoppers could pay using biometric security and their phone. This gives Apple a far more secure mobile payments solution with all the convenience we’ve imagined from mobile payments. This certainly brings Apple one step closer to getting into the payments business. Amazon and PayPal should watch out.”
Both of Apple’s new iPhones will use the new iOS 7 mobile operating system, which Apple announced June 10 but that only now is becoming available on iPhones and iPads. That system includes two features analysts say may also drive m-commerce: Apple’s iCloud Keychain and AirDrop. ICloud Keychain enables consumers to access their encrypted data stored in Apple’s iCloud regardless of the Apple device they use, and works similarly to auto-fill capabilities employed by many web browsers, where stored data automatically populate data fields. That may be helpful when filing out information typically required in checkout such as address and phone numbers, experts say. Keychain itself can be password-protected.
AirDrop enables users to drag and drop a file to send it wirelessly to another user on the same network. This makes file sharing easier by eliminating the need for users to connect by using complicated network configuration commands. While the correlation to mobile commerce is not as obvious for AirDrop, George Peabody, an analyst at consulting firm Glenbrook Partners LLC, says AirDrop may drive mobile commerce in stores. For example, he says a consumer might be able to send her payment and identification information to an in-store Apple device operated by the retailer. The retailer could verify the consumer’s identity using a photo included in the AirDrop content, he suggests. That technology might compete with the likes of Square Wallet where the consumer’s payment information and photo appear on the merchant’s Square Register software, he says.
At the press conference today, typically tight-lipped Apple executives disclosed that the company has now sold 700 million iOS devices, up from 400 million a year ago.