Apple Prepping iPhone as a Digital Wallet?

Apple may be on the verge of adding a digital wallet feature to the iPhone --at least, according to speculation after the company announced the hire of Benjamin Vigier, a well-known developer of near field communication (NFC) devices and systems.

Vigier, who most recently served as product manager for mobile wallet, payment and NFC at U.S. mobile payments specialist mFoundry, joined Apple (NASDAQ: AAPL) last week. At mFoundry, he conceived and managed both the PayPal Mobile service and Starbucks' barcode-based mobile payments service and developed the mobile wallet apps for a pair of top mobile network operators and major U.S. bank.

The hire combined with a TechCrunch report that cited unnamed sources claiming Apple is already testing NFC-enabled iPhone prototypes using chips from NXP Semiconductor, suggest the company is once again ready to be a disruptive and, perhaps, leading force in another emerging mobile market.

Throw in the fact that Apple has filed for patents in the past few months for products including "an NFC-based mobile payments service that lets consumers make payments to merchants and other consumers" from their debit cards, credit cards and iTunes accounts, and for "iPay, iBuy and iCoupons" based around an NFC-enabled iPhone, and it seems like it's really just matter of when, not if, Apple CEO Steve Jobs rolls out mobile payment technology on its ubiquitous smartphones.

Popularization of NFC ahead?

NFC technology makes it possible for consumers to send data wirelessly over short distances, roughly four or five inches away, to payment terminals and other wireless devices, including smartphones, laptops and tablet PCs.

While major wireless service providers, banks and even some retailers have dabbled a bit with NFC technology -- including some on Google's Android mobile operating system -- analysts say the technology is still very new, largely untested and likely prone to security issues if and when it becomes a mainstream transaction option.

"The micropayment industry is one that is evolving quickly enough right now that it provides a lot of opportunities for Apple to step in," Charles King, principal analyst at IT research firm Pund-IT, told InternetNews.com. "Apple has been very effective at finding opportunities to be a disruptive influence in unsettled or fairly unconventional markets. With the iPod and iTunes, it turned the MP3 market on its head and had a similar impact on what people have come to expect from smartphone vendors."

Apple officials were not immediately available to comment on Vigier's hire or rumors that it's already testing NFC-enabled iPhone prototypes.

However, Apple already has 150 million subscribers using their credit and debit cards to buy music from iTunes store and has enjoyed early success with its Starbucks card on the iPhone feature, so it's clear Jobs and company have a good idea of where they want to go and how they want to get there.

But will Apple wait until the next-generation iPhone is released, or will it push out its proximity payment applications sooner -- before other vendors and network carriers are ready to move?

"I'm not necessarily sure they'd even need to wait for the next generation of the iPhone," King said. "If Apple can distribute it as an app through its App Store and have it work across multiple Apple products, they may not have to wait long at all."

King added that once NFC-enabled devices and retail systems are in place, Apple stands to rake in healthy profits, whether it charges on a transaction-by-transaction basis or a flat monthly service fee.

When NFC does mature and smartphone vendors, retailers and service providers get on the same page, consumer adoption figures to be strong considering most smartphone users are already accustomed to managing their personal and professional accounts from their smartphone and rarely, if ever, without them.

"Probably the most obvious barrier to this technology is centered around security," King said. We've already seen malicious code distributed on the Android and other wireless platforms."

"If a significant portion of consumers start using smartphones for transactions, it will become a very big target for a variety of nefarious folks."

Larry Barrett is a senior editor at InternetNews.com, the news service of Internet.com, the network for technology professionals.


iPhone, Apple, near-field communication, mobile payments, mobile commerce