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Apples new tech could create closed payment system
NEW YORK (1/31/11)--Credit unions will want to monitor what is happening in the world of mobile phone technology and contactless payment technology. Computer giant Apple is planning new technology that would turn consumers' iPhones and iPads into wallets, with consumers waving the devices at payment terminals or paying for items through their iTunes accounts. If that caught on big time, it could have ramifications for credit card companies, financial institutions, and interchange, said an analyst featured in ComputerWorld article Friday. Various technical publications are reporting that Apple, based in Cupertino, Calif., plans to embed near-field communications (NFC) technology into its next generation iPads and iPhones. (Jan. 28) reported that Apple has job postings in the field, and consulting firm Envisioneering Group said unnamed engineers working on the project have said Apple will introduce the NFC chip in the devices. Apple has also filed for NFC-related patents, including a device that allows consumers to scan a ticket near their smartphone and get content related to that event. Apple's entry into the fray would disrupt the mobile payment industry, according to Avivah Litan, an analyst at Gartner research firm. Apple has a huge base of 160 million iTunes users, which gives Apple the ability to act as its own closed payment system, with little need to interface with credit card companies and financial institutions. It could shut out credit card companies in much the same way that PayPal does in its field, Litan told ComputerWorld (Jan. 28). iTunes users still could use credit cards and banking accounts to fill up their iTunes accounts, but that would be the extent of financial institutions' involvement in an Apple mobile payment system, said Litan. In another article, Litan noted that creating a new payment system would cut out middle men like Visa and MasterCard and said credit card associations should be concerned (The Red Tape Chronicles on Jan. 21). "The thing about Apple is they could do a system like PayPal, but they also have a physical device in people's hands," Litan said. Others are attempting to get a head start on NFC technology. Last year, AT&T Mobility, Verizon Wireless and T-Mobile USA announced they were working with Discover Financial Services and Barclays on introducing an NFC-based mobile payment system in the U.S. Others working on NFC capabilities include Google and Samsung, and PayPal, the articles said. Visa and Mastercard are working to steer mobile phone transactions through their systems, and Bank of America last year tested an NFC-chip based purchasing system. While some believe a new payment system won't go very far without major changes in payments infrastructure and more security on mobile devices, 160 million consumers are ahead of the game, paying for small purchases on iTunes. And they're getting stronger: In second quarter 2010 alone, 42% of all consumer handsets sold in the U.S. were smart phones.


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