Reading Apple’s iWallet Tea Leafs

By Gary Schwartz

Another mobile commerce patent from Apple this week. Surprised? – not likely. This application filed last year and released this week by the US patent office is one of a series of Apple’s NearField Communications (NFC) commerce patents. So much NFC restrained activity from one of the only handset providers that has not played its NFC cards.

It is clear that Apple is committed to become the dominate mobile wallet. It is also clear that iCloud and Easypay services are building blocks towards a NFC-enabled wallet. It is not difficult to read the tea leafs.

Let’s start with this week’s patent which is particularly interesting. Apple addresses the possibility of virtual SIM card to be built into a NFC secure element (SE).

What does this mean? It means wireless carrier beware.

In carrier trials around the world (ISIS, Google Wallet in the US, and Enstream in Canada) the existing SIM that carries the phone subscribers wireless credentials now can host other NFC secure credentials (payment, affinity, data, access keys, etc.). These NFC secure element sits inside the SIM and makes the carrier the gatekeeper to the all credential provisioning.

Of course, this is not ideal for the handset manufacturer and Apple has the annoying habit of challenging existing models.  With this key patent, Apple’s reverses the business model. The SIM sits inside the embedded secure element.  This makes Apple the de facto gatekeeper to the all credential provisioning.

We all know that Apple is a well-oiled marketing machine and never moves a game piece without plotting a win-win strategy.  Everything Apple has points towards becoming the virtual wallet gatekeeper with a full-blown NFC rollout of iPhone 5.

Let’s look at Apple’s three step launch of their iWallet:

Step One: iCloud

iCloud is Apple’s version of cloud data management. It also sets up the company for more frictionless cloud-based commerce.

iCloud’s value proposition is clear: instead of manually transferring iTunes purchases, photos and documents to your devise, iCloud will use the Apple ID to wirelessly sync your files and the progress in consuming a book or film between all Apple’s iScreens. Get it. Love it.

On face value, Apple is untethering their legacy iTune sync solution and opens up a cloud-based sync where all data is held remotely available anywhere across all screens. You can find your phone, find friends, sync data, reunite with old iTunes purchases, keep photos on all of your devices and even bring your entire music catalog. It provides storage and backup. It is the cloud computing dream.

It also allows for any extended commerce that Apple wishes to provision in this cloud to be equally fluid and frictionless.

Step Two: Easy Pay

Apple rolls out its EasyPay payment system in its US retail stores. Taking Apple Stores customer sales to another level, Apple shoppers in the bricks & mortar store can purchase accessories by scanning in a barcode and checking out in the iCloud via their iTunes account.

This is obviously a trial and the scanning is an interim step (much the same as Google’s early tests using QR codes that they abandoned when they finally launched their NFC wallet strategy.)

However, what is important is that EasyPay moves iTunes towards a more terrestrial Nearfield Communications iWallet. Not burdened by the store POS but in the store never-the-less.

Step Three:  An NFC enabled iPhone

If Apple launches a NFC-enabled iPhone in 2012 it can now combine its iCloud with the iWallet and fold the learning of EasyPay.

What do Apple’s NFC patents tell us about their NFC vision?

  1. The key patent filed by Apple in August 2009, ties NFC mobile payments to iTunes payment account. The four million strong iTunes community is Apple’s largest wallet asset.
  2. Apple has added promotional patent elements including iCoupons and the ability of the NFC phone to read a tag on a consumer product in order to obtain a benefit provided by the manufacturer or retailer. This expands the wallet functionality beyond payment, which is key to monetization.
  3. NFC then permeates the iCloud: Apple has filed patents to NFC enabling remote services such as iPod, iPhone, Apple TV to be paired via NFC to keyboard, camera, printer, and remote control.  Apple also filed patents around using NFC to transfer files between these devices.
  4. Finally and practically Apple has drafted a design patent for phonetop e-Wallet icon.

An icon that we will likely see on our phonetop quite soon . . .