Reading Apple’s iWallet Tea Leaves

Another mobile commerce patent from Apple in November. Surprised? Not likely. This application, filed last year and released this week by the U.S. patent office, is one of a series of Apple’s Near Field Communications (NFC) commerce patents. This is much NFC activity from one of the only handset providers that had not played its NFC cards.

It is clear that Apple is committed to becoming the dominant mobile wallet. It also is clear that iCloud and EasyPay services are building blocks towards a NFC-enabled wallet. It is not difficult read the tea leaves.

Let’s start with this week’s patent, which is particularly interesting. Apple addresses the possibility of a virtual SIM card, which carries the wireless phone subscriber’s credentials, to be built into a NFC secure element (SE).


What does this mean? It means wireless carrier beware.

In carrier trials around the world (e.g., ISIS and Google Wallet in the U.S., and Enstream in Canada) the existing SIM now can host other NFC secure credentials such as payment, affinity, data, access keys and more. These NFC SE’s sit inside the SIM and make the carrier the gatekeeper of all credential provisioning.

Of course, this is not ideal for Apple as a handset manufacturer, which has the annoying habit of challenging existing models. With this key patent, Apple again reverses a business model: The SIM sits inside the embedded SE, making Apple, not the wireless carrier, the credential provisioning gatekeeper.

We all know that Apple is a well-oiled marketing machine that never moves a game piece without plotting a win-win strategy.  Everything is pointing to Apple becoming the wallet gatekeeper with a full-blown NFC rollout of iPhone 5.

Let’s look at Apple’s three-step launch of its iWallet:

Step One: iCloud

iCloud, Apple’s version of cloud data management, positions the company for more frictionless cloud-based commerce. iCloud’s value proposition is clear: instead of manually transferring iTunes purchases, photos and documents to a device, iCloud will use the Apple ID to sync files and one’s progress in consuming a book or film wirelessly between all Apple’s iScreens. Get it. Love it.

On face value, Apple is untying its legacy iTune sync solution and opening a cloud-based sync where all data is held remotely and available anywhere across all screens. You can find your phone, locate friends, sync data, reunite with old iTunes purchases, keep photos on all of your devices and even bring in your entire music catalog. The approach provides storage and backup. It is the cloud computing dream. It also allows for any extended commerce that Apple wishes to provision in this cloud to be equally fluid and frictionless.

Step Two: EasyPay

Apple rolls out its EasyPay payment system in its U.S. retail stores. Taking Apple Stores customer sales to another level, Apple shoppers in the brick and mortar store can purchase accessories by scanning a barcode and checking out in the iCloud via their iTunes account. This obviously is a trial and the scanning is an interim step ― much the same as Google’s early tests using QR codes that they abandoned when they finally launched their NFC wallet strategy.

However, key is that EasyPay moves iTunes towards a more terrestrial NFC iWallet.

Step Three: An NFC-enabled iPhone

 If Apple launches a NFC-enabled iPhone in 2012, it can combine its iCloud with the iWallet and fold-in the learning of EasyPay.

What do Apple’s NFC patents tell us about its NFC vision?

1. The key patent filed by Apple in August 2009 ties NFC mobile payments to iTunes payment accounts. The 4-million-strong iTunes community is Apple’s largest wallet asset.

2. Apple has added promotional patent elements including iCoupons and the ability of the NFC phone to read a tag on a consumer product in order to obtain a benefit provided by the manufacturer or retailer. This expands wallet functionality beyond payment, which is key to monetization.

3. NFC permeates the iCloud: Apple has filed patents to NFC-enabled remote services such as iPod, iPhone and Apple TV to be paired via NFC to keyboard, camera, printer and remote control. Apple also filed patents around using NFC to transfer files between these devices.

4. Finally, and practically, Apple has drafted a design patent for a phone-top e-Wallet icon, one we will likely see quite soon . . .

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