Banking Fintech Mobile & Online Payments

Is Apple Passbook a friend or foe of banks?

Is Apple Passbook a friend or foe of banks?
Written by Jim Bruene

Apple is making tools available to developers to create apps that play nice with Passbook, says Jim Bruene, who outlines what may happen next.

Apple Passbook card overviewIf it wasn’t obvious already, Apple is becoming the operating system of your life, and since money touches much of what we do, it’s no surprise that the company is moving into the payments side.

Actually, Apple is already there. The most valuable company on the planet is already the biggest payments issuer, with 400 million payment-enabled iTunes accounts. Now, when iOS6 becomes available this fall, Apple will be the biggest mobile wallet provider too, with 100+ million iPhones automatically getting one with the new OS upgrade.

The new baked-in wallet app is called Passbook (I presume because iWallet was taken, or Apple is saving it for something even bigger). Yet, regardless of the name, Passbook has broad implications in payments and commerce in general. One look at the UI (inset) shows what banks are up against: an app loaded with store cards! – just what a gazillion big-spending early adopters have been hoping for (congrats to Target and Starbucks for leading the way again).

The main reason iWallet Passbook is such a big deal, besides the Apple halo effect, is that it automatically opens your ‘virtual card’ when you walk in the store. Yes, you read it correctly. Automatically. Opening. Mobile. Payment card.

Apple Passbook Starbucks paymentFor example, when you walk into Starbucks, its virtual store card, rendered in 2D bar code, will be triggered on your phone. You just swipe the lock-screen notification, enter a PIN (if necessary), scan your phone at the POS, drink your coffee and enjoy the perks (see below).

Is the POS experience dramatically better than using your Visa/MasterCard plastic? Not really during those 15 seconds of your life, but it’s not worse either. Shaving two seconds off transaction time isn’t what this is about. It’s the retailer value-adds that make it a huge winner. Smart merchants will tack loyalty points/rewards/amenities (how about a free shot of vanilla in that latte?) on to Passbook-enabled purchases and you will soon be conditioned to pay with your phone. Really, just having your receipt stored safely in the Passbook app could make the difference between using the store card vs MC/Visa.

Because Apple wants to be a platform, not a bank, they’re making the tools available to developers to create apps that play nice with Passbook, along with all the other iPhone utilities. So I see this as bank/issuer friendly – so far anyway, though not everyone will benefit.

While this is only speculation, I see a couple things likely to happen:

  1. Proprietary single-brand (closed loop) payments make a comeback: With a direct connection to the front screen of your iPhone as soon as you walk in the door, retailers can put together compelling in-store loyalty offers on-the-fly. For example, I can walk into Best Buy and up pops my store loyalty card on the front of my iPhone. And they can dangle all kinds of bennies at me in real time, while encouraging me to pay with my Best Buy credentials rendered in a QR code on the screen (and later via NFC or a ‘cloud’ connection).
  2. Banks and card issuers partner with retailers to become the preferred ‘Passbook card’: For stores that don’t want to bother with the payments piece, instead of presenting a store card when the customer walks in the door, they could present the preferred partner card. For example, Costco, which only takes American Express, could launch an AmEx Passbook card when customers walk in the door.
  3. The beginning of the end for paper receipts: Users will have the comfort knowing their receipts are all accessible via iPhone (and in the iCloud), so they will opt out of paper receipts at the register.
  4. Mobile offers/coupons just found a new home: If you want iPhone-wielding consumers to see your offer, Apple just created an instant place to store (and discover) deals. I’m not sure if this is good or bad for ad-supported banking, but it’s something to consider.

I could go on (for instance about Siri integration), but my head is about to explode with all the possibilities. Time will tell, but I think we just witnessed a watershed moment in mobile-enabled shopping and payments.

– This article is reproduced with kind permission. Some minor changes have been made to reflect BankNXT style considerations. Read more here.

About the author

Jim Bruene

After developing the first major PFM-based online banking program at US Bancorp in the early 1990s, Jim Bruene went on to found two companies in the space: Online Banking Report and the Finovate conference series. He has been writing and geeking out on digital financial services nearly every day for more than 20 years and is currently Principal of BUX Advisors, a fintech UX/UI consultancy, as well as continuing to help guide content at Finovate events.


  • Forget about Google Wallet, PayPal Wallet or Isis. Apple is going to win the mobile wallet war.

    Why? Their massive reach: default install on all Apple devices. Plus: Apple already has your credit card details. Actually Apple is the company with the most credit cards stored, world wide. How? iTunes and App Store.

    A merchant would face a simple decision, support PayPal with a wallet that is new and unknown or start supporting Passbook by a company of which they know and see their customers using every time. It’s no rocket science. And given the fact Apple will launch supporting Starbucks it will be a simple and easy way to start for the not tech savvy and early adopters.

    Sure, there are more people using Android. But the Android market is way to fragmented: different OS versions, devices and capabilities. Making it more difficult to push a default wallet app and rule the world.

    But what for me is the most convincing argument why Passbook will be more successful: iPhone users simply spend more money. In the App Store (vs Market) but also when buying goods online: iPhone/iPad users spent more and frequent more online shops then Android users. Making it the better target audience for new/better payment options.

  • Thanks for sharing Jim! Great article and insights. I’m not that sure however, how I would like it if my telephone starts beeping with special offers every time I walk into a store 🙂 But a better integration between payment and coupons (I never would print a coupon and ask for a discount) would be great.

    Although I hope Jelmer is right with the traction Apple will / should get. I think banks would not give up this battle and specially the Isis partnership has a lot of power and money to start fighting this mobile wallet battle.

  • At launch Wednesday, and as of today, sept 24, Passbook leaves much to be desired, like a working link to App Store passbook-enabled apps, number of apps that currently integrate, and user understanding/guidance on how to get something into your passbook. At some point it will be more seamless, but for now I wait.

    • If you click the “App Store” link you will be taken to a list of Passbook enabled apps.

      If you don’t use a Passbook enabled retailer and link your account — something you and the retailer are responsible for doing — then … yes, the app does nothing. Just like if no one sends you email then your inbox will be empty.

      Some retailers — Target, Wal-Mart — have already provided methods for getting accounts linked but it’s up to retailer to provide the details. The Target card won’t show up in Passbook unless you login to your Target account and link it to Passbook.

    • You need to put something into it. If you don’t use a Passbook enabled retailer and link your account — something you and the retailer are responsible for doing — then … yes, the app does nothing. Just like if no one sends you email then your inbox will be empty.

  • This is the perfect site for anyone who wants to find out about this topic. You understand a whole lot, it’s almost tough to argue with you (not that I actually would want to … HaHa). You certainly put a new spin on a subject that’s been written about for decades. Excellent stuff, just great!

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