Jun 12, 2012

3 Reasons Why Apple Passbook Might be a 'Smarter' Google Wallet

At the WWDC today, Apple made a bunch of product announcements. Passbook was one of the most interesting new features of the iOS 6, apart from the turn-by-turn navigation that effectively shuts down the nice business of AT&T to charge $10 monthly fee for its app :-)

Passbook ‘paperlessly’ stores all your passes - loyalty cards, coupons, movie tickets, boarding passes etc and even visually ‘shreds’ them when you are done! Passbook was innocuously positioned as ‘the simplest way to get all your passes in one place’, but it is clearly the harbinger of Apple Mobile Wallet. The vision might look similar to Google Wallet, but apart from its cool features, Apple Passbook might be a much smarter mobile payment/ mCommerce strategy for three reasons:

Consumer Utility First - before big Vision
Instead of painting a big technology vision that might (or might not) be a reality in 5 years, Apple positions Passbook in a few simple, but high consumer utility scenarios that are applicable today. Boarding a plane & going to the movies are everyday scenarios where consumers struggle to deal with paper today. Giving an elegant solution to these problems provides concrete consumer utility - a critical driver for adoption. The challenge for Google Wallet (and other e-Wallet projects) has been the initial barrier for adoption, unless you are a major technology enthusiast and early adopter.

In vintage Apple style, some of the Passbook features are extremely intuitive - such as the geolocation sensing to automatically pop up the pass on your screen when you approach the movie theater to avoid the hassle of pulling out the phone and finding the app etc. I felt notifying the United passenger about gate changes in a real time boarding pass was absolutely a killer! We have not seen such simple & compelling demonstration of user value by any other mobile Wallet projects.

Mobile Loyalty First - before mobile payments
Apple starts with the store loyalty card scenarios and does not offer mobile payment or store your credit cards. As I wrote earlier, mobile payment is not a real problem for most consumers today. Even the smartest solution will still require carrying the plastic credit cards for the foreseeable future, until ALL the merchants you visit adopt THE mobile payment solution. Moreover, mobile payment is a highly immature market and an extremely difficult problem to solve due to the challenges of NFC, and that might be the reason why Google Wallet has not taken off. On the other hand, carrying plastic loyalty cards is an annoying problem today and can be solved one store at a time.

Apple is still positioned to win the mobile payments market, when it finally matures in 3-5 years. An Apple mobile loyalty & payment solution could also be far less intrusive to consumers, as unlike Google or Facebook, Apple business model is not driven by advertising and pushing many offers to consumers.

Ecosystem First - before all the answers
Passbook is clearly positioned as a platform with APIs that any developer can start writing applications on top of. I do feel bad for the many mobile loyalty start-ups that probably see their niche evaporate overnight, but it could be a great opportunity. Passbook gives a stable platform for companies - from big retailers to small startups - to build innovative applications in the loyalty & payments space. And nobody is better at building and managing an ecosystem to offer an end-to-end solution like Apple.

It’s even more significant here, as mobile payment is an ecosystem orchestration game, where only a neutral intermediary can win. A single provider will always struggle to get widespread adoption due to conflicting self-interests of parties. Consumers will never want to use 5 different apps either.  Retailers, wireless carriers, credit card companies, and banks are today in denial trying to build their own competitive payment solution, but they can work with Apple, who is not competing on payment. Hopefully, after a few failed attempts, they will be a lot more willing to embrace the Apple payment solution, when it comes out!

Of course, Google can be that intermediary, but starting with their own big bang payment initiative alienating many stakeholders probably didn't help. Facebook has the potential to enter offline commerce (as I speculated earlier), but after the IPO fiasco, I suspect the company’s first priority will be to appease the revolting shareholders and build up the mobile advertising revenue stream.

I don't know if Apple is really trying to kill Google, but it is gingerly getting into the local commerce, discovery & mobile payments and it will be a good thing for the consumers!

Here is an excellent Quora answer explaining the Passbook features in detail.