Here Comes the First iPhone Wallet

Man uses an Apple iPhone in Tokyo, Japan on July 16, 2014

Source: Atsushi Tomura/ Getty Images

Apple recently confirmed that it is holding a media event on Tuesday, September 9, via a typically cryptic invitation that offered no clue as to what may be in store. Despite the company’s usual lack of disclosure about its upcoming plans, it’s widely expected that Apple will be unveiling two new iPhone models and a wearable tech product at the event. While most of the buzz surrounding Apple’s next-generation devices has focused on the increase in screen size, there have been several rumors about other improvements implemented in the so-called “iPhone 6” models.

Besides including the usual hardware upgrades — such as faster processors — at least some of Apple’s iPhone 6 models are believed to feature a more scratch-resistant display material called sapphire. There have also been long-running rumors about the implementation of a new mobile payments system that would turn the iPhone into a digital wallet. In January of this year, The Wall Street Journal cited insider sources who reported that Apple executives were meeting with various industry leaders to discuss the establishment of a new mobile payments service. More recently, a report from BrightWire in May claimed that the iPhone 6 would include a Near Field Communications (NFC) chip that would allow users to make wireless payments.

Now, with the debut of the next-generation iPhone models less than two weeks away, a new report from the Financial Times appears to offer further evidence that Apple’s new devices will indeed mark the company’s entry into the burgeoning digital wallet market. According to “people familiar with Apple’s plans” cited by the Financial Times, Apple has enlisted Dutch chipmaker NXP Semiconductors to provide an NFC chip for the iPhone that would allow it to be used as a wireless payment method. NXP Semiconductors is a known Apple supplier with nine separate facilities on the Cupertino-based company’s 2014 supplier list.

ROBYN BECK/AFP/Getty Images

ROBYN BECK/AFP/Getty Images

The new report from the Financial Times aligns with previously leaked iPhone schematics that were obtained by a Chinese repair company called GeekBar and posted on Weibo earlier this month. Based on the schematics, GeekBar identified a PN65V NFC chip supplied by NXP Semiconductors in the upcoming iPhone.

Although many other details about Apple’s mobile payments system still remain unknown, the Financial Times’ sources appear to confirm that the company will be relying on an NFC-based solution in the next-generation iPhone. While NFC technology has long been used by many Android-based smartphone makers, Apple has so far refused to embrace the technology. For this reason, many industry watchers have speculated that Apple would develop its own wireless payment solution based on an alternative protocol. However, based on the information provided by the Financial Times’ sources, it appears that Apple will be primarily relying on the well-established NFC-based payments technology.

Mobile payment options have long been available from companies like Google, which offers an NFC-based payment solution through its Google Wallet app. Despite this, the use of smartphones as digital wallets has failed to gain widespread popularity in the U.S. A recent study conducted by Thrive Analytics showed that less than one-third of U.S. consumers use digital wallets, even though nearly 80 percent of them are aware of digital wallets as an alternative form of payment. The study found that the security of mobile payments remained one of the primary concerns for consumers, along with “lack of usability.”

However, with Apple soon to be entering the mobile payments market, the overall digital wallet market may soon receive a boost. Apple is known for creating user-friendly software that is closely integrated with its hardware and an iOS-based mobile payments app could give consumers a simpler and more intuitive method for making mobile payments. With the vast majority of malware still found on Android, Apple’s iOS may also give consumers a better sense of security.

Although it’s not clear exactly how Apple’s mobile payment system plans will play out, the company may utilize the large stockpile of credit cards that it has on file through its approximately 800 million iTunes accountholders. The iPhone maker has also outlined several possible mobile payments scenarios in its many patent filings. Last year, Apple filed a patent that described a wireless mobile payment system that utilized the iPhone as a virtual wallet and smart shopping assistant. Another patent filed this year described a method for ensuring that the payment information in wireless transactions would be securely transmitted through a combination of NFC and Bluetooth technologies.

Industry watchers will get a better sense of Apple’s mobile payment system plans when the company unveils its new devices at the media event scheduled for September 9. While it remains to be seen if Apple’s next-generation iPhone models will become the first digital wallets to gain widespread adoption in the U.S., the company’s track record of success suggests that it may not be long before cashiers ask shoppers, “Are you paying with cash, credit, or iPhone?”

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