Apple concerned about mobile payment security

Company isn't yet willing to enable credit card payments via the iPhone due to concerns about security

Google already offers Google Wallet payments via Android phones and Microsoft is set to launch its own digital-wallet service, but Apple isn't yet willing to enable credit card payments via the iPhone due to concerns about security.

Apple will launch Passbook alongside iOS 6 this autumn, as outlined in our 30 reasons you need iOS 6 feature, the system will provide an integrated iOS solution that holds all of you concert ticket purchases, boarding cards, and so on in one Apple app. These can then be accessed from the Home screen, or inside the app itself. What Passbook lacks is the option to link to credit or debit cards, so consumers can't use it to replace their wallets.

Reports claim that Apple does want to integrate payments, however, the company is holding back, waiting for other mobile manufacturers to test the water.

According to a Wall Street Journal report, Apple's head of iPhone software Scott Forstall is interested in providing the technology for NFC (Near Field Communication) payments via the iPhone. WSJ sources claim Forstall's engineering team has been studying NFC technologies for over-the-air payments and have patented some NFC ideas (a patent, pictured, was awarded in March).

NFC is a short-range high frequency wireless communication technology that enables the exchange of data between devices up to 10cm apart, the set up time is significantly faster than Bluetooth, it doesn't require battery power, and it is considered more secure because of its shorter range.

However, according to reports, Apple said to be concerned that squeezing in the required chip and a new antenna may severely impact the iPhone's battery life.

Apple is also concerned about whether NFC technology is secure enough, according to reports. Apple chief financial officer Peter Oppenheimer is said to have questioned whether there was newer secure technology that employed the Internet rather than use NFC, according to the WSJ sources.

Apple head of world-wide marketing Phil Schiller is also said to be worried that if Apple facilitated credit-card payments on the iPhone consumers might blame Apple if they had a bad experience.

Piper Jaffray analyst Gene Munster believes Apple is biding its time before entering the mobile payment market because they are comfortable letting the other mobile companies make the mistakes first. "They let their competitors do their market research for them," he said.

Munster noted Apple's relatively late entries in the MP3 player, smartphone and tablet markets as proof that: "Apple is always a comfortable number two."

Schiller seems to back up Munster's suggestion, he is reported to have said that digital-wallet mobile-payment services are "all fighting over their piece of the pie, and we aren't doing that."

Yankee Group analyst Nick Holland agrees: "Right now it is just a gold rush." Holland notes that the business models and leaders will be more solid in 18 months the market is nascent enough that Apple can afford to take its time, according to the WSJ report.

There is still speculation that Apple will introduce Near Field Communication with the iPhone 5, which is expected to launch in September or October, however, according to air transport IT and communications specialists SITA, if Apple's new iPhone doesn't have NFC "it's game over".

SITA's Jim Peters believes retailers should prepare for the arrival of NFC: "There is a lot of debate that NFC will never take off because of all the arguments. But you need to get ready, this is coming. This is going to happen. By the end of the year the majority of smartphones that you go and buy will have NFC on them. If in October the next iPhone comes out and it has NFC on it, it's game over."

MasterCard's Ed McLaughlin hinted that Apple was venture down the credit card/payments road. "I don't know of a handset manufacturer that isn't in the process of making sure their stuff is PayPass ready," McLaughlin said.

There are also claims that Apple will use Bluetooth 4.0 instead of NFC.

Gartner claims mobile-payment transactions will exceed $600 billion world-wide by 2016, up from $172 billion this year.

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