The future of Passbook. Apple’s bid to replace your wallet with iPhone

About a month back, Apple released a new version of iPhone and an updated version of iOS, which powers the device. iOS 6 introduced over 200 new features including deeper social networking integration, a more powerful Siri, but a sub-par version of Apple’s new in-house maps app. However one feature that didn’t receive the spotlight due to the maps hoopla and the iPhone 5 launch, was a new app called Passbook.

Passbook aims to become a mobile wallet for all your digital coupons, membership and gift cards, movie tickets and boarding passes. Instead of Apple choosing to add a Near Field Communication (NFC) chip in the iPhone, Apple decided to create its own solution. With the introduction of Passbook, Apple placed a mobile wallet in over a 100 million iPhones. The adoption of Passbook among a range of industries which range from restaurants, attractions, and retail vendors like Walgreens and Target have been rapid and continue to increase every day.

iTunes Account as a digital credit card

What does Passbook look like as of today? Let’s take a look. Since I use Passbook on a daily basis to pay for my coffee at Starbucks, I will take that as an example. As of today, in order to purchase a cup of coffee via my Passbook, I have to download the Starbucks app and register a gift card. Then, I have to add credit to that gift card. Once that is done, a barcode is generated and can be displayed in Passbook to purchase a cup of coffee. However, at some point Starbucks could start accepting payments through your iTunes account. Not only Starbucks, but many other retailers could offer the same thing. Rumor has it that the Apple Store will be the first to offer payments via your iTunes account soon. This would eliminate the need for additional setup and your iTunes would become a digital credit card.

It would not only be a win-win for consumers, but also for merchants. Currently, merchants have to deal with annoying credit and debit cards fees, but Apple can help retailers bypass that by simply offering this solution. With over 425M iTunes accounts with credit cards or debit cards, the potential is enormous.

 A new type of rewards system

As of today, many retailers offer a way for customers to sign up for a rewards system at the time of purchase, which is a great, but is in need of disruption. Why must a physical card be shown in order to redeem points? I pretty much say no to these since I don’t have room in my wallet to carry a card for Best Buy, Safeway, Walgreens, etc. Even if you can use your phone number to give you credit for a purchase, the coupons are cash cards which I never get around to redeeming. Currently retailers that offer users a way to redeem points via their app are doing it wrong since they still mail you a physical copy of a coupon. However, the space in my smartphone is endless for such cards.

Passbook can become the central hub where you can earn reward credits then redeem that credit towards your purchase. Since Passbook has geofencing, it can also alert you about special offers when you enter a store. A paperless offers like these would be a gigantic step to fix a broken system.

 Behavior Change

Before the introduction of iPhone in 2007, we didn’t need a smartphone and data access to get around. However, in no time, Apple and Google was able to change our behavior of something we could live without, into a need. Try going a day without your iPhone or Android device these days. Ha! Good luck.

Passbook is another way for Apple to cause a behavior change among us. Apple wants consumers and merchants to be comfortable with using a smartphone at the time of purchase — something that has been tried via Google Wallet and other solutions, but have failed so far. Currently, people and merchants are mostly using Passbook as a barcode generator, but as its popularity increases, the smartphone itself will turn into a point of sale system (POS). Also, eye candy features like push and location services certainly enhance the user experience and build awareness.

Bottom line

Apple’s Passbook still has a long way to go, but it is inevitable that the app will turn into mobile wallet and a mobile payment app. Passbook for Apple is more than “just an app”. It is a key part of company strategy.

 

Author: Parth Dhebar

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  • rhonin

    General sales through iTunes account via Passbook? Say what!?!?!
    After a couple of major issues via iTunes and my CC, I now have an iTunes only card – not for general purchasing.
    Passbook is more like a “Rewards Card” app than a “Wallet” app and I have found easier Reward Card apps.
    Maybe someday it will be a Wallet but it needs a lot of work.

  • http://about.me/gutierrez Jose Gutierrez

    Apple needs to stop trying to re-invent the wheel with every side project it takes on.
    Ping was a disaster because they failed to work out a deal with Facebook.
    Passport has that same potential to fail because Apple is not doing anything serious with it. They should instead work out a partnership with Square who has been making much more progress in the field of mobile payments. Apple knows how to acquire companies and should continue to do so in order to avoid wasting time.