Mobile payments could hold the key to Apple's next $100 billion

 

Apple has been a near permanent fixture in the headlines since the launch of the original iPhone in 2007, but this month the company received special attention when its market cap topped the $600 billion mark and it was made known it had more than $100 billion in cash reserves.

Predictably, a plethora of comparisons began to be drawn around Apple's worth and you can find an eye-watering listhere. Some choice examples include the estimates that put Apple's value above that of the global coffee industry and the international illegal drugs trade.

The position that Apple has now, not just financially but also within the hearts and minds of the modern consumer, gives it the perhaps unique ability to enter new sectors and make them "Apple" in a way that feels completely natural to us -- and by making them "Apple", I mean of course beautiful, desirable, easy-to-use and hugely profitable. Alternatively they also have the option to dip their toes into new markets without the need for much innovation on their part. When businesses are dependent on your ecosystem for continued growth, new ways can always be found of ensuring that their growth results are inexorably tied to yours and this generates fresh revenue streams in the process.

During the recent era of Apple's ubiquitous media presence, the concept of digital payment for goods and services has been threatening to bubble to the surface and is quickly gaining pace.

Since Square's launch in late 2010, the number of middleware services entering the transaction market has been picking up steam and I'm a big fan of anything that resembles innovation in this sector. It's dumbfounding that the security around US card transactions in 2012 is still so lax that merchants hand you back your card before you've even signed the receipt. When my brother first moved to New York, he found this so ridiculous he started to leave a different signature on every receipt, from describing his role in the transaction e.g. "customer" to simply a word for the thing being paid for e.g. "brunch". Have a look at his collection of non-legally binding signatures to get a sense of how "hard" it is to commit credit card fraud in the US.

In my role as a Digital Strategist at TH_NK, I've been watching with interest the progress of businesses like Square, iZettle, PayPal and MPowa in recent months and I can't help but notice the emphasis they put on Apple products both in terms of device support but also in terms of the imagery and language they use in their communications. Looking through their websites, you could be forgiven for assuming they were in the business of selling Apple hardware, and actually they are. As a small business owner, you're going to be conscious of the fact that you're asking people to swipe their credit cards through a tablet which in itself might be a turn off. But to what extent would that feeling be exacerbated by presenting your customers with an Android tablet which they don't immediately recognise?

So where does Apple fit in?
Skimming off the top: Apple has a reputation for collecting their dues from businesses that make money from their platforms. 30 percent from iTunes and App store purchases, 30 percent from in-app subscriptions, 30 percent, 30 percent, 30 percent. How long will it be before Apple start looking for their cut of the 2.5-2.75 percent transaction fees that the likes of Square charge for their services? I think they will wait at least until these middleware products start to turn a profit. Latest estimates suggest that Square is still making an operating loss of $100,000 per day despite processing $11 million in the same time frame. Apple has nothing to gain in the short term by killing off these businesses which are still finding their feet and could prove to be fruitful partners if nurtured in the short term.

Bringing a gun to a knife fight
The interest in products like the iCache Geode suggest that there is a real consumer appetite for converting a wallet full of debit cards, credit cards, loyalty cards, identity cards and so on into a single, easy to use, digital solution. No matter how much I love the Geode, I can't help thinking it's nothing more than a sticking plaster on a problem that someone will solve very soon. Now if only there was a business that held a high level of consumer trust, wasn't tied down to a single financial institution and had access to our pockets 24 hours a day. They could really shake things up if they had the stomach for it...

Transforming The Way We Pay

The iPad's Next Trick:

Revel Systems has realized the iPad, already changing various industries, has the power to take cash registers into the 21st century.

It's not just Square that is playing with iPad-based tech to change shopping.
Revel Systems just scored an interesting coup that'll help it transform how American consumers actually shop in stores: Its new iPad cash register system will from now on be installed by Best Buy's Geek Squad--meaning small to medium stores all the way up to big chain stores will get much faster access to a next-generation cash register, installed by technical whizzes for a more painless experience.

The company has only been out of beta test since August, but the firm's press release notes it's grown "exponentially" and is "processing millions of dollars with major brands such as Camille's Sidewalk Café, Popeye's Louisiana Kitchen, and Twistee Treat." Those aren't exactly massive megastores, but they are household names for millions of people, and Revel is in at the ground floor of these companies with its iPad-based system.
The idea is simple: Cash registers, even the newer touchscreen computer-based ones, are bulky, old-fashioned, expensive, and not particularly reconfigurable on the fly. They typically involve a large number of expensive pieces of hardware, with cash drawers, the registers, credit card machines, and a central management computer all connected up in a complex way.

 


But the iPad is small, powerful, cheap, comes with a built-in touchscreen and intuitive UI, and is naturally good at networking. And that's what Revel's system makes the most of: iPads can be used as the employee-facing part of a point-of-sale-system, with a touch interface that each store can configure to meet its needs with a simple drag-and-drop management software. The iPads interface with credit card readers and standard cash drawers, but are small, cheap, and reliable--and they deliver data to a central database so management can view transaction information, and peruse a suite of analytics about their business. Because the app is user-configurable, it's also possible to use it to help with payroll management, inventory tracking, employee time-system management, and even esoteric things like a daily menu change in a restaurant.

But there's another mode Revel's iPad system works in: Customer-facing "kiosk mode." That means the same intuitive, customizable UI can actually let consumers choose their own order (right down to picking ingredients in some food stores) and pay for it at the iPad interface. That offers all sorts of potential savings for small business, who may need fewer employees actually in the customer-facing part of their store, and it could mean faster ordering for customers too.

The company's cofounder and CEO Lisa Falzone spoke with Fast Company about the idea, which sprang originally from an iPad app designed for restaurants where the customer would view the menu, order, and pay on an iPad, which is an idea other firms have tried. Falzone said: "Through doing that and talking to the different restaurant owners and actually trying to integrate into the current point of sale systems we just realized that it was really hard to integrate, and they didn't have an open API. And for the restaurant owners they were hugely expensive, and they still had these back-office servers at $3,000 up-front cost and the touchscreen systems that were out there were slow because they had to talk to the server every time you touched their screens. We figured that the iPad was the perfect touchscreen for the next-generation touchscreen point-of-sale system."

In particular Revels' solution offers the "speed of a local system but the benefits of a web-based system." And to back it up Revel has an open API, so they've gone into partnership with existing payment firms, and it means the system is highly flexible. It's also got integrated networking, which means chain stores' systems all communicate so central management can see how sales are doing on a store-by-store basis. As Falzone notes, this means they're "not going after Square's market, which may be street vendors and so on," instead targeting bigger firms with more revenue.

That's all well and good, and Revel is likely to achieve much success and its customer list is growing as stores see the benefits of a cheap and flexible system that transforms their point-of-sale tech, but what this actually is is a sniff of the future of shopping. Twistee Treats, one of Revels' customers, has for example noted that people are using the iPad system preferentially "because they'd rather type their order in to a kiosk than speak to a cashier," as Falzone explains. And in terms of mobile payments, the idea is to adapt Revels' core code to allow mobile pay solutions and even mobile ordering before you arrive at the physical store, perhaps a little like Apple's EasyPay iOS solution.




The firm is already partnered with a firm called LevelUp, which lets you quickly pay at next-gen cash registers by simply having the register's camera scan a unique QR code on your smartphone's screen--for Revels' iPad solution, with its built-in webcam, that means the entire cash register could be just the iPad, with no extra peripherals to take a payment. That sounds subtle, but think about the complexity of a standard cash desk nowadays, with custom boxed hardware to print receipts, process your card and so on--if all you need is a wired-up iPad instead, you can completely streamline your cash desk. And even take it mobile, with emailed receipts and other solutions that depart from the way we pay for things right now.

This sort of system is also prefectly married up to the idea of mobile payments using NFC wireless tech, which Revels' app is already compatible with. And, interestingly, Falzone pointed out that so far her system is selling pretty much on its own merits, with customers actively seeking it out...which means that though other aspects of payment tech are maybe lagging, stores themselves are desperately keen to get this technology into your pocket sooner rather than later.