Bloomberg Blows it Again–Apple’s Payment Plans are Pure Speculation
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The NFC and payments worlds were all abuzz recently with news that Apple planned to introduce its own payment service using a new generation of NFC-enabled iPhones and iPads.
That was according to an article by Bloomberg news service, which relied on a single source for its "scoop," a technology consultant with no direct knowledge of Apple’s plans, no experience in the payments industry and only a passing knowledge of NFC.
That didn’t stop Bloomberg from hanging the entire story on quotes from the consultant, Richard Doherty, and for scores of other publications to repeat the yarn without question.
As Bloomberg would have us believe, Apple plans to put NFC-enabled iPhones and iPads packing a new contactless iTunes payment application into the hands of millions of consumers, who could tap the devices to pay and redeem mobile coupons at the physical point of sale. Doherty, who has a fondness for dropping the name of long-departed Apple co-founder Steve Wozniak, supposedly cited engineers working at Apple itself as the source of his inside information.
And what about the lack of terminals at the shops and restaurants across America to handle this contactless iTunes payment service–now used mainly for online music and movie purchases? No problem. Apple has already created a prototype payment terminal that it would heavily subsidize or even give away to ensure that small merchants, such as hairdressers and mom-and-pop shops, could accept the new form of payment, Doherty revealed, according to Bloomberg.
'They Went Over the Top with Things'
But Bloomberg didn’t even get Doherty’s statements right. He didn’t talk to engineers employed directly by Apple at all. In fact, he was only citing developers working for equipment makers in Taiwan and China, who sometimes supply Apple with parts. They, in turn, had talked to app developers who speculated that Apple would be going for NFC and payment in a big way in its forthcoming iPhone and also its iPad 2.
"Bloomberg erred totally in quoting me as saying (the engineers worked for) Apple," Doherty told me in an e-mail, adding by phone: "It was overplayed. They (Bloomberg writer and editors) all went over the top with things."
Doherty, who is director of New York State-based consulting firm Envisioneering Group, had only told Bloomberg he thought Apple was "exploring" options for NFC-based payment. But despite his protestations, Bloomberg wouldn’t change the lead of the story, which attributed to him the revelation of Apple's "plans" to let customers tap their iPhones and iPads to make purchases.
"Any consultant or analyst who says they know of what Apple is planning to do more than two weeks ahead of time is either a liar, an opportunist or both," Doherty told me.
As for Apple having created a prototype of a payment terminal that small businesses could use, Doherty said he was mainly talking about sample terminals vendors have provided Apple over the years and which Apple has worked with.
Most of the rest of the Bloomberg story, including comments from another consultant, Richard Crone, offers nothing save for more speculation on why Apple might want to launch its own payment scheme. And the story again trots out the hiring of "NFC expert" Benjamin Vigier by Apple last spring as project manager for mobile commerce. As I pointed out last summer and again last week, Vigier is only a junior-level manager with spotty NFC experience. It turns out he was hired mainly to improve payment technology in Apple’s retail stores, not for NFC, a source told me recently.
Repeating the Rumor
Of course, any story in a major publication that has Apple rolling out its own payment service–no matter how thinly sourced–is sure to attract a crowd from the herd-like tech press and bloggerheads. And sure enough, publications large and small followed Bloomberg’s story–nearly all of them repeating the Bloomberg story line without a bit of critical reflection, let alone any effort to check out the story.
But we’ve been here before. Last spring, rumors of Apple’s impending purchase of contactless reader and TSM vendor Vivotech got big play. Those stories started from an innocent comment by an IDC analyst to a Bloomberg reporter, who blew it way out of proportion, as this blog pointed out.
More recently, the same Bloomberg reporter who created the recent Apple payment fuss wrote that Google was considering starting its own payment service, as well. That story was based on two unnamed sources. But I’m told by some solid sources that Google is not necessarily interested in launching its own payment service, but rather in enabling a range of payment applications on NFC phones. And to that end, it is developing a mobile wallet, nicknamed Cream, as a default app for its Android operating system for smartphones.
Google itself is focused on generating revenue from mobile advertising and promotions and, therefore, needs data on payment transactions. So it could be involved in the NFC-payment process, but is unlikely to launch its own payment service.
NFC-Enabled iPhone Expected
Apple is likely to adopt NFC for its next iPhone, due out this summer. In addition to all of the patent applications Apple has filed involving NFC, it’s clear the company can ill-afford to fall too far behind Google with the technology. Google is already in NFC-rollout mode.
But Apple launching its own payment service is another matter entirely, and there is little evidence to back up the rampant speculation that Steve Jobs plans such as service.
Vigier’s hiring last spring and Apple’s recent advertisement for a manager of global payment platforms do not mean Apple is preparing to launch a new payment brand with NFC at the physical point of sale to compete with Visa and MasterCard. Its NFC patent applications do not support this theory either.
It’s always possible Apple has bigger plans for iTunes, with its more than 150 million accountholders. But what is largely missing from all this speculation is the fact that payments is not Apple’s core business–selling devices is.
ITunes and the App Store are mainly intended to help sell iPods, iPhones and iPads. By themselves, iTunes and the App Store haven't been very profitable. And Apple likes profits. So the lower margins the payments business offers would not be attractive to the company. Neither would the heightened government regulation that would come with any big move into payment. I’m told that a least a few payment company startups have tried to interest Apple in buying them out, but Apple has passed on all of them.
Lacking anything more solid than the current speculation, William Rossiter, vice president for global marketing at U.S.-based point-of-sale terminal vendor Hypercom, which is being acquired by competitor VeriFone, believes Apple will stick with its core business.
"If I believe the (press) articles, Apple is about to leap from virtual goods to physical goods, from iTunes linked to my debit and credit cards or PayPal account to iTunes linked directly to my bank account, from a virtual store to a physical store, and also roll out payment terminals to 'encourage fast, nationwide adoption,' " he remarked to me. "Even before I ask to what the Apple payment terminal connects, that’s a big leap."
Instead, Apple will use NFC to make its apps more appealing in general. The goal is to sell more devices, better yet, multiple devices to consumers. A major theme running through Apple’s numerous patent requests involving NFC is the use of the technology to sync devices and share content among Apple products.
Apple did file an important patent request that put the iPhone at the center of the retail shopping experience, but not with iTunes or any other Apple-led payment service as the prime payment application.
The patent suggested Apple could make revenue by charging fees to enable product manufacturers or retailers to send down coupons or other offers to the iPhones of consumers at critical points in the purchasing process. Or the phones could recommend a particular bank's payment application–with Apple extracting more fees from the bank.
And certainly, Apple could offer a mobile-wallet app to hold various payment applications from banks or other service providers residing on the NFC-enabled iPhones it is expected to roll out.
But there's no evidence that such a rollout also signals the planned launch of an Apple-branded mobile-payment service. There isn't an app for that, yet.