Is Apple Making a Mobile Wallet Play?

Probably not apparent to all folks but a fundamental reason that in-application advertising performs so much better than mobile web advertising, is because there is a very clear path to an ecommerce transaction. Most in-app ads lead back to the iPhone app store from which another app could be purchased meaning it’s truly performance-based since it can be measured and optimized. Mobile web advertising was always at a disadvantage since it rarely led to a transaction (ie Is the user as likely to purchase a product through Amazon on his phone as he is on his PC?). The answer is no, since it’s so painful to enter credit card details into a mobile device (via app or browser).

Now, you could argue that merchants could integrate with Paypal and use them to process transactions on mobile under the assumption that it is more likely that a consumer has his credit card details cached with Paypal versus the merchant itself (exceptions maybe being Amazon). However, in an informal poll amongst my friends (non-techies), a surprising number of them did not have their credit card or bank account associated with their Paypal account (and I live in the Bay Area!). In addition, Paypal may not yet have that global footprint plus merchants definitely want to process the transactions through their own system for data collection, reporting, handling chargebacks and of course lower fees.

The alternative to a cloud-based payment system (a la Paypal) would be to store the payment details on the device itself (ie credit card details encrypted and stored on the mobile device). In this model, the browser or an app could conceivably request the details from the device/OS and form-fill the credit card purchase page. There were some under-the-radar examples of pieces of this at MWC with one SIM card provider storing CC details on the SIM.

Going back to the Apple question, what’s interesting is that iTunes is similar to Paypal and Amazon in that they have a large number of registered users with cached credit card details (cloud-based payment). With the recent Quattro acquisition, you have an interesting scenario where Quattro could go to the publishers and while selling ads, offer iTunes as a payment gateway. Effectively, if Amazon (or an equivalent) wanted to buy product ads on the iPhone, they could and then process them through iTunes as the payment gateway to avoid the huge drop-off that usually occurs when the user has to enter CC details into the payment landing webpage on a mobile device. This would mean that yes, ecommerce transactions could be as likely on mobile as they would on the PC, if not greater since it’s effectively a one-click experience across the whole web. This of course assumes that Apple adjusts their rev-share for non-app store digital products to be in-line with CC fees (and of course that they are willing to deal with all the pains of being a Paypal (eg chargebacks etc) but it is quite a unique advantage that Apple, as an OEM has given all the user CC details they hold.

The same scenario is actually possible with Google Checkout and Android but they have by far fewer stored credit card details (today) but maybe that will change. Nokia with their bundling of Openbit as part of the OS, may have a play their as well.

Payments and advertising is definitely looking exciting!