April 2010

Apple Set to Dominate Mobile Payments and Ticketing?

Patents are always an interesting way of watching what the big boys are up to. This month a number of patent applications became visible which shows that Apple is clearly doing a lot of research in the mobile payments and ticketing field. For those that have not come across it before there is a whole website devoted to the subject www.patentlyapple.com just for Apple.

Where do we start? Well first of all a lot is happening around NFC for the iPhone. Last month we came across the iCarte 110 NFC Reader for the iPhone.

Apple Set to Dominate Mobile Payments and Ticketing?

The advertising spiel tells us that here is the way of making secure contactless payments and downloading coupons, tickets and receipts and just in case we hadn't thought of it for moving data between 2 NFC enabled iPhones. Perhaps we could even make payments between two iPhones?

Now going to the Apple patent web site mentioned previously we immediately walk in to iTravel which is an iPhone application for making travel reservations and downloading the boarding passes etc. This is followed closely by the Concert and Event ticket iPhone application. Just on the same page and not to be ignored are more patents to do with the iTunes on-line virtual store.

Now that's all very well you may say but what's new here? Well we need to add a little more, this month a few more Apple patent applications came to the public's attention. The most interesting one to me was the 'System and Method for Processing Peer-To-Peer Financial Transactions' (US 2010/0078471) part of a set filed by Apple citing Gloria Lin and her co-inventors. Some of the obvious intentions are the handling of conventional credit and debit cards where quite ingeniously the iPhone camera can be used to read the data (using image processing) printed on the surface of the card. However the real interest is in trying to decipher what Apple might really be up to. What is meant by P2P financial transactions because this is the difficult bit with conventional electronic payment schemes? We should also note immediately that it is envisaged that these peer to peer transactions will be based on NFC. So how might this work?

Apple Set to Dominate

According to the Apple patent it is assumed (as a possible option) that the Payor (i.e. the consumer) has an NFC enabled mobile phone and that the merchant's terminal is also NFC enabled. For a payment transaction the following steps are anticipated,

1.The Merchant sends the payment request message to the consumer's phone using NFC

2. The iPhone sends details of the payment card information to the terminal by NFC

3. The merchant sends the transaction details to his acquirer using the existing protected network connection, who will in turn communicate with the card issuer to get authorization for the transaction

4. The acquirer returns the authorization response to the merchant

5. The Financial payment operator arranges for the appropriate accounts to be credited and debited as part of the settlement and clearing process

This is effectively the subject of the primary claim in the Apple patent which has an initial filing date of September 30th 2008. I think it is highly unlikely that any patent examiner is going to allow this claim as it is pretty well the basis of the conventional credit and debit card payment protocol.

However claim 2 is more interesting, because the card information sent to the merchant in step 2 above is extracted from an image of the payment instrument (i.e. the card) taken on the phone's camera.

Now I don't think anybody has done this before (Sept 2008) but nor is it likely to revolutionize the electronic payments world. Even in America there are moves towards contactless smart cards so why do you need the additional mobile phone step and if you've got an NFC phone wouldn't you store the card information in the phone? I can't see any security advantage in taking a picture of somebody's credit card, in fact you might be even more worried if the cashier disappeared around the back with your payment card.

So back to the title, why is Apple going to dominate the mobile payments world? It's simple, they're adequately resourced with funds and skills and they are clearly working very hard in this area, what other patents are wandering around that we haven't yet seen? And please ignore the publication date of 1st April, pure coincidence!

And here's the punch line, if anybody can get the user interface right for making a mobile phone payment it's going to be Apple and right now I don't think anybody has got this right. So stand by, mobile phone payment on the iPhone using NFC is probably not far away!

By Dr David Everett, Smartcard & Identity News


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