Paying the Apple Way: It’s Coming, But Not Likely on New iPhone

By Marcus WohlsenEmail Author

A few weeks ago, Apple proposed one of the most expensive purchases in the company’s history. Of course, $356 million to buy fingerprint security outfit Authentec amounts to sock-drawer change for the world’s most valuable company, which has $117 billion in cash. But it seems hard to believe Apple would spend that kind of money without planning to do something with its new ride. As others have noted, the aggressive speed with which Apple worked to close the deal over the summer hints that Authentec’s tech will find its way into new products sooner rather than later — perhaps as soon as tomorrow.

Apple does have a history of acquiring smaller companies and then erasing them without making any obvious use of them. But the timing of the Authentec deal so close to the launch of the iPhone 5 seems like a clear signal that Apple wants to bring stronger personalized security to its mobile devices. This makes particular sense with the coming release of iOS 6 and its native Passbook app. Screenshots show that Passbook will use QR codes to store airline boarding passes and movie tickets on your iPhone, as well as coupons and club cards from major retailers. Adding an extra layer of protection via a fingerprint sensor could offer greater security for Passbook, though using a fingerprint to protect your Starbucks card seems more like security theater than a vital function. Still, Apple may well take that step simply to get users comfortable with fingerprint-based security in order to lay the foundation for more serious apps in the future tied directly to bank accounts and credit cards.

Authentec advertises its fingerprint sensors as the best approach to making payments with your smartphone using NFC, fueling speculation that the iPhone 5 will come with such chips, which many proselytizers see as the key to paying with your phone at the checkout counter the way you do with your debit or credit card today. But those Passbook QR codes hint otherwise. Scanners that can read NFC won’t likely become ubiquitous among U.S. retailers for years. In the meantime, the capacity to read barcodes that simply show up on the phone’s screen is already widespread. Apple also seems unlikely to stick a chip in its new phones that relies on an infrastructure that’s still barely even half-baked.

When Apple finally does put an NFC chip into a phone, you can bet the company will have the experience of using that chip fully mapped out and partnerships in place to ensure a tight rollout. This is not Google, which is more than happy to tie Google Wallet to the modest number of available NFC-equipped Android phones and see how that works out with select retailers. That experiment-in-the-wild approach fits Google’s culture, but not Apple’s. And even Apple can’t force the overhaul of the entire U.S. point-of-sale payment infrastructure overnight. While Passbook might nudge more consumers to start thinking of their phones as the place to store some of the things they would normally keep in their wallets, the Authentec deal hardly means your iPhone will replace your analog wallet’s core functions anytime soon.

One caveat: MasterCard sent out a curious press release this morning headlined “First NFC Enabled iPhone Prepaid Wallet Set for Launch in Europe.” The clear implication is that the iPhone will have an NFC chip.* Indeed, the press release goes on to say that the wallet app, called “moneto,” will make possible “tap and go” payments with the iPhone at half-a-million retail locations in 41 countries. At the same time, it’s highly unlikely that MasterCard would break any kind of embargo detailing new iPhone features the day before Apple’s latest big reveal. A MasterCard exec earlier this year reportedly stumbled around the question of whether the new iPhone would be NFC-enabled. But closely read, today’s press release doesn’t assert outright that the iPhone will have an NFC chip; just that MasterCard’s app will be able to make use of NFC. I’ve emailed MasterCard for clarification but haven’t heard back yet.

Update (September 11, 2012, 2:15 p.m. PDT): Thanks to commenter Adeola Bannis for pointing out the missing piece of the puzzle. To wit, this line from the Mastercard press release: “The moneto prepaid mobile wallet uses a combination of the MasterCard® PayPass™ technology and DeviceFidelity’s iCaisse4X case to enable tap & go™ payments on the iPhone” (emphasis mine). Turns out the iCaisse4X comes with its own NFC technology. Slide in your iPhone and, voila, an NFC iPhone—no iPhone with built-in NFC implied. It works with the above-mentioned “moneto” mobile payment app, which can be used at stores that accept Mastercard’s swipeless Paypass cards.