Will Apple Press Forward Or Take a Pass on Passbook Payments?

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Passbook? The topic of Apple Inc.’s loyalty application didn’t come up Wednesday afternoon when the leading Silicon Valley tech company’s top brass discussed their latest quarterly results, which stock analysts found disappointing. But some smart-phone industry observers see evidence that Apple is laying the groundwork for a full-fledged mobile-payments system, possibly built around Passbook.

By opening the Passbook app, Apple’s iPhone and iPod touch users can easily retrieve stored tickets, electronic gift cards, boarding passes, loyalty points, and related digital content for 23 companies through apps available in Apple’s iTunes Store. The service works on iPhones and iPod touches running iOS 6, the latest version of Apple’s mobile operating system. Passbook is not available, at least not yet, on Apple’s iPad and iPad mini tablet computers.

Corporations offering Passbook apps include Starbucks, five major airlines, Ticketmaster, and Fandago, the online movie time-and-ticketing service, and retailers such as Walgreens and Target. In addition, merchant processor Square Inc.’s Square Wallet can be stored in Passbook, and Discover Financial Services enables its cardholders to redeem rewards using its Passbook app. American Express Co.’s Passbook app enables AmEx cardholders to get transaction alerts and monitor their accounts.

If an app such as Starbucks’s or Square’s facilitates payments, the user can get to it quickly through Passbook though Apple itself doesn’t handle the payments. Yet Passbook has only added fuel to years of speculation about Apple getting more deeply involved in payments beyond serving its own customers in the closed-loop iTunes and App Store environments. Some of this speculation rests on the appearance of Passbook as one foot in the payments door.

“Passbook is a service,” says Jeff Orr, senior practice director, mobile devices, at Oyster Bay, N.Y.-based ABI Research. “If there is a critical mass of Apple device users that see Apple as a trusted portal … one logical extension is to do payments.”

Many payments rumors surrounding Apple also arise from a number of patents the company has obtained over the past few years that have payments applicability, including at least one involving near-field communication (NFC) technology.

Then there is Apple’s huge customer base, including an estimated 400 million iTunes account holders who buy music, videos, and apps, giving the company a foundation to enter payments should it desire, as well as the millions of iPhones, iPod touches, and iPads in the market. Apple, which introduced the iPhone 5 late last year, sold a record 47.8 million iPhones in its first quarter of fiscal 2013 ended Dec. 29, up 29% from 37 million in the year-earlier quarter.

Apple is notoriously closed-mouthed about upcoming products and services. A spokesperson did not respond to a Digital Transactions News inquiry about Passbook or its possible payments plans.

Some industry observers downplay Apple using Passbook as a payments portal. “I look at Passbook as an extension of the iOS capabilities, but I don’t really look at it as a payment solution or as a wallet,” says Rick Oglesby, a senior analyst at Aite Group LLC, Boston. “It’s purely a container for somebody else’s payment solution.”

Other observers have expressed disappointment that the latest iPhone doesn’t have NFC, a powerful technology but one more expensive to implement than other mobile-payments technologies such as barcodes. Apple smart-phone rival Samsung offers NFC in a number of devices, including the Galaxy S III.

Apple also may have bigger fish to fry than payments. While impressive, the iPhone’s first-quarter iPhone results fell short of analysts’ expectations of 50 million units, which in addition to flat earnings and concerns about constrained growth opportunities caused a sell-off in Apple’s stock late Wednesday and Thursday.

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