While companies like Google and Paypal have struggled for years to make seamless mobile payments a reality, the Cupertino, California computer electronics behemoth may push the envelop with the release of it's iPhone 6 later this month, particularly as it is reportedly in talks with three of the biggest payments industry companies to make a far-reaching mobile wallet a reality.
In addition to state-of-the-art technology involving a nearfield communication chip (NFC) and fingerprint scanning technology for security, Apple's new phone wallet reportedly loops in American Express, Mastercard and Visa, which together control the credit card landscape, for payments.
The combination of technology and payments partnerships is likely to give Apple wide appeal as it takes on competing wallets. If the rumors are true, Apple would be able to give consumers and businesses a broader range of transaction options.
"Apple's anticipated design will likely increase consumer acceptance for mobile wallets and could be a game-changer for user acceptance," says Brian Riley, senior research director for CEB Tower Group, a financial services research firm.
Ultimately, the digital wallet would function as easily as a real-world wallet, enabling payments in retail locations and online with a tap or swipe of a mobile device. Purchases would also be linked to incentive point earnings, which could be gathered there and available for use like cash.
Currently, however, the market for a mobile wallet is fractured and scattered, with competing technology including for hardware and software, and no one unifying standard. A consortium of telecommunications companies called ISIS, for example, relies on phones with the nearfield communication chip. On the other hand, Google's electronic wallet can use a nearfield chip, but doesn't require it, and compared to Apple, it has just one payments partnership, with Mastercard. Meanwhile, Paypal, which is working on distributing its wallet with consumers and retailers alike, doesn't use NFC at all. A host of startups is also actively at work creating digital wallet technology.
None has the heft and consumer appeal that Apple does. Already, Apple's iTunes store functions as a kind of primitive wallet where consumers store their credit card numbers to buy apps and other content directly from their phones. With nearly 1 billion consumers using it, the company reported $7.6 billion in revenue for the first nine months of 2014 just from the iTunes store.
Apple's wallet app, known as Passbook, allows consumers to gather items like movie, airline, train tickets, and rewards points, on an in-phone app. While it does not allow for payments, according to a recent survey by Thrive Analytics, it is the third most popular wallet out there, after Paypal and Google.
Nevertheless, Apple may have an edge with younger consumers. Although 80 percent of consumers are aware that mobile wallets exist, less than a third actually use one, according to Thrive. For millennial consumers, however, nearly half of whom use some form of digital wallet, Passbook is their preferred electronic wallet.
There are other significant challenges for mobile wallet acceptance as well. Chief among those obstacles is signing up enough retailers to accept mobile wallet payments. In the case of phones that use nearfield communication chips, which allow consumers to pay at the point of sale by tapping their phones, that also requires merchants to upgrade their sales machines to accept the payments.
An Apple phone with an NFC chip and list of heavy-hitting financial partners may provide the incentive merchants need, some experts say.
"Assuming that Apple is in fact developing a proximity mobile payment capability using NFC for the iPhone 6, the addition of Apple devices eliminates a significant barrier to the success of NFC...and positions the area for significant growth," says Thad Peterson, a senior analyst with Aite Group, a financial services research and advisory company.
The tougher sales job is likely to be with consumers, however.
"Despite lackluster results by large issuers such as CitiBank and Wells Fargo, and internet based companies like Google and PayPal, consumers find little interest in the technology and still favor their physical [credit] cards," Riley says.