I reported here about what I think are some of Amazons plans to continue to dominate the online market space. Of the four online giants that I follow, Google, Apple, Facebook and Amazon, my money is on Amazon for the long term.  But I only follow Facebook just to figure out the timing for their melt down. I continue to think that Amazon’s strategy is not fully appreciated but in this post, I am going to speculate about another company, Apple, and its strategy for dominating the physical world of retail.

 

 

 

The Story begins with the iPhone 5s

Ever since the iPhone 5s came out, I have been wanting to post about the strategic significance of a number of its features.  In this post I will cover how it is a significant harbinger of Apple’s strategy to dominate retail transactions.

 

Apple wants to be the dominate platform for transaction performed in the physical world of retail just as Amazon wants to dominate the online world of retail.  Google has a “do everything” strategy similar to Microsoft in the 90s which we Intel Executives use to refer to as the “Mile wide and inch deep” strategy.

 

While the iPhone 5s fingerprint scanner is a work in progress, I am convinced that we will be using fingerprints as a  secure way to conduct transactions.That is why the introduction of the fingerprint reader in the iPhone 5s is so very important.  As one who has lost their credit card in an airport only to find out that a few thousand dollars of transactions were made in a just few hours, I can really appreciate the day when, instead of carrying a credit card in my wallet,  I can use my finger.

 

Low power Bluetooth 4.0 is very important in respect capabilities such as iBeacon which I will cover a bit later.  This is not a new capability but I wanted to mention it here since it is very relevant to my point of view regarding Apple’s strategy.

 

Some have thought that the introduction of a 64 bit processor in a phone was just a marketing ploy.  I don’t think so.  I think there are couple of reasons why Apple went in this direction.  The first is that this will allow them to upgrade the iPhone 5s with a new OS that will be available on future Apple Devices and the Mac desktop and notebook computers. The second is they will need the computing power to provide for a number of in store capabilities yet to be demonstrated.

iBeacon

 

iBeacons are small devices that can be spread around a physical environment such as a retail store or even a mall.  They use Bluetooth 4.0.  The protocols allow for a device such as an iPhone to establish communication without the use of Wifi or cellular capabilities.  Apple has already started using this in their own stores.  It will be possible to locate the device which means that directions can be given.  Now I am not talking about how to get to the grocery store.  I am  talking about how to find the milk in that store.  Offers can be made to consumers as they walk into stores or around stores.  And it will be possible to pay for items by scanning the products’ bar code.

 

 

 

 

 

 

 

 

The evolution of Credit Cards

 

The history of the credit card is very interesting.  It started in the 1920s by companies like Standard Oil who issued credit cards to allow drivers to purchase gas.  Diner’s card was the first general card. American Express came along l ater.  Then it was Visa and Master Card that really drove the mass adoption in the USA.  The use of credit cards came later in Europe and Asia but are not routinely used.  Most credit cards outside the USA are “smart card”, with embedded chips to provide more security.  ATM cards came a long which do not provide the credit feature since they draw money directly from a consumers account but they do have the convenience of credit cards as well as the security attributes. The use of ATM cards do not cost the retailer anything. They pay no fee and they get the benefit of having the money deposited into their accounts immediately.  Credit cards pay the retailer almost right way but since they charge a fee, it is almost as if they are lending the retailer money.  The bank makes money by using the float.  After all, I will have to have the cash just sitting my my account if it is going to be available for use by my ATM card.  On the other hand, the credit card company provides me with a float meaning that I am not charged for up to 30 days for the use of their money.  The average is 15 days. But then they are hoping their customers will not pay off the balance so they can charge them 18% or so a year on their unpaid balances.  To complicate matters further, the notion of getting loyalty points, like airline millage, is also now linked to credit cards.

 

Now many people have a number of cards in their wallets.   I have five myself and I never use the credit feature.  For me it is all about the convenience of not having to carry cash, the tracking of my purchases. and to a lesser extent, the ability to dispute charges.

 

Remember coupons?  I am sure some of you still use them.  I bet most of you can not remember or ever knew about “stamps”.  I think the use of coupons in the physical world is diminishing but I am not sure about that.  But the use of virtual coupons has just started.

 

As we can see, the world of retail transactions has gotten very complex and this creates a major opportunity for guess who?

 

 

 

One Stop Payment the Apple Way

 

iTunes has made Apple one of the largest processors of transactions globally.  Right now, iTunes uses a credit card that you supply to Apple. For every Apple ID there can be just one credit card. But I would much rather just use my phone. I could decide on what “card” to use and have the security of my finger print (which I think works very well on the iPhone).

 

About 2/3 of Americans carry iPhones.  I would guess this represents over 90% of buying power in retail.  No company is in a better position to make the phone the new payment device.

 

This capability can of course go beyond just retail stores.  For instance, I am also looking forward to the day I can have my restaurant bill presented to my phone and paid with my finger print instead of waiting and waiting for for the bill to come.

 

Recently, I was in NYC and discovered that I could pay for most taxi rides using an app that communicated with the Taxi’s meter system.  Finally, I have receipts for my taxi rides!

 

Recently, I was in NYC and discovered that I could pay for most taxi rides using an app that communicated with the Taxi’s meter system.  Finally, I have receipts for my taxi rides!

 

 

 

Apples’ real objective?

 

I am not  quite sure what Apple’s real objective is but I can see at least four possible ones

 

• They could make money from every transaction.  It would require a lot of heavy lifting byut Amazon for instance already has a credit card.
• Collecting information about our buying habits and selling that to business
• Making the iPhone even more indispensable to consumers.
• Introducing Apple Points just as I expect Amazon to do

 

 

 

 

 

 

What do you think?