Apple Pushes Deeper Into Mobile Payments
Tech Giant Lays Groundwork to Expand Service for Physical Goods
(Updated by Endah)
A customer uses PayPal’s mobile payment application on her iPhone to make a purchase in Tokyo on Nov. 18, 2013. Bloomberg News
Apple Inc. AAPL -1.82% is laying the groundwork for an expanded mobile-payments service, leveraging its growing base of iPhone and iPad users and the hundreds of millions of credit cards on file through its iTunes stores.
Eddy Cue, Apple’s iTunes and App Store chief and a key lieutenant of Chief Executive Tim Cook, has met with industry executives to discuss Apple’s interest in handling payments for physical goods and services on its devices, according to people familiar with the situation.
In another sign of the company’s interest, Apple moved Jennifer Bailey, a longtime executive who was running its online stores, into a new role to build a payment business within the technology giant, three people with knowledge of the move said.
Those people said Apple also spoke to at least five other well-known executives in the payment industry about the position before tapping Ms. Bailey.
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An Apple spokeswoman declined to comment, and declined to make Ms. Bailey available. Ms. Bailey didn’t respond to requests for comment.
A payment service would launch Apple into what is becoming a fierce battle over how people pay through mobile devices. Other players include eBay‘s EBAY -1.04% PayPal unit, Google Inc. and startups such as Square Inc. and Stripe Inc. Forrester Research estimates that Americans will spend $90 billion through mobile payments by 2017, up from $12.8 billion in 2012.
Just this week, Stripe said it received $80 million in funding that valued the four-year-old startup at $1.75 billion. The same day, activist investor Carl Icahn called for eBay to separate PayPal, which he called “a gem” of its business, into an independent company.
Mr. Icahn also owns a stake in Apple, and has been pushing the company to return more money to shareholders. In a letter to Apple shareholders Thursday, Mr. Icahn urged the company to invest in mobile payments. “We believe a revolutionary payments solution is now a very real opportunity that the company could choose to pursue,” Mr. Icahn wrote.
Currently, Apple handles payments for movies, books, and music purchased through its iTunes store. Consumers can also buy apps and pay for items such as digital goods within an app through an iTunes account.
In its retail stores, Apple allows shoppers to pay for some products by scanning the item and paying with a credit card tied to iTunes. It has introduced new technologies that could allow for paying through an iPhone, including a fingerprint reader for security and an iBeacon location-sensor that detects when someone is nearby.
However, Apple doesn’t allow consumers to pay for physical goods and services, such as shopping for clothes or hiring ride-share service Uber, using an iTunes account. Users still need to input the credit-card information manually, an extra step that often deters purchases on smartphones.
The potential for Apple is enormous—the company said last year it had 575 million registered users with its iTunes store, and it has sold roughly 375 million iPhones over the past five years and about 155 million iPads since its 2010 debut.
“Apple is absolutely the sleeping giant in the payments world,” said Denee Carrington, analyst at Forrester Research. “They have the capability; they just haven’t tied it all together.”
The Journal reported in 2012 that Apple had studied ways to break into payments, going as far as working on a “wallet app,” before scaling back ambitions over concerns that customers might blame Apple for a bad experience with a merchant. In April 2013, Mr. Cook told investors on a conference call that mobile-payment technology was “in its infancy.”
Speculation about Apple’s interest heightened earlier this month with the disclosure that Apple had applied for a patent covering payments for goods through a signal sent from a phone to a wireless receiver. The patent could indicate an interest in letting iPhone users pay for goods in stores through their phones. It isn’t clear what Apple’s exact plans are or how far along it is in its strategy.
Apple could offer iPhone users the option to fill in credit-card information automatically based on a card already registered with iTunes. Another possibility, raised by one industry executive, would be to reduce fraud by using an iPhone’s fingerprint reader before completing an online purchase.
“If Apple is in the game, it certainly changes the space and would make merchants think differently about who to partner with,” said Ms. Carrington.