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March 06, 2012

First Thought: Apple’s Move in Financial Services

Apple has made a lot of noise in becoming the biggest, most watched company in the land. One by one, the little fruit computing company that could has made end runs on the titans of industries including music (iPod/iTunes), mobile phones (iPhone/Appstore) and personal computing (iPad/iCloud). Many believe a similar end run on the television market is right around the corner, maybe even as soon as tomorrow. In each case, a similar story unfolds.

A rumor suggesting Apple will introduce some innovative product circulates through the technology press. Endless speculation ensues about this or that iProduct. Occasionally, the rumored product is indeed launched to much fanfare. Tech pundits decree the iProduct in the following week as either category changing or, not good enough. A year later, competitors respond with copies, half-hearted attempts to deliver Apple value with marginal, complimentary benefits (eg. barely lower prices or so-called “openness”), and after another year hilarious quotes are dug up to illustrate how out of touch these CEO’s really are. The story ends with Apple skewering an industry with the major players never really even understanding what was happening until it was too late. Thus, the end run is complete.

Right now, everyone is focused on the iPad3 as well as the rumored iTV. Both are huge announcements so the focus is warranted. Given its explosive growth and the potential for tablets to actually surpass PC’s in units sold by the end of 2013, iPad3 is expected to be another blockbuster hit. The next version of Apple’s TV “hobby”–whether an incremental AppleTV or the hyped iTV–should be another deft step showing that even the biggest company in the world can dance. Of course this news is important.

But what if the world, while obsessed with tablets and TV’s, missed Apple’s moves in an even bigger game, namely, financial services?

Consider this image for a patent–the iWallet–which was granted to Apple today:

Combine this iWallet with Transaction, an App and host of related patents for NCF payment and financial services:

Apple seems to have developed a set of patents critical to how people will make payments on mobile devices in the future, while keeping in mind the 220M+ credit-card enabled iTunes account holders that aregrowing exponentially. The logical next step is pretty astounding: Apple should be at the heart, or taking a cut, of every mobile transaction. Their IP will force the issue while their massive customer base greases the gears.

I’ve worked with enough financial services clients to know this type of end run on their bread and butter is absolutely unthinkable. Banks and credit card companies are just too big, too old and too profitable to believe anyone but the government could unseat them. Big financial services look at the Simple banks of the world and they just don’t see a threat.

But what if Apple provided all of the function—mobile payment, connecting the dots between different accounts, integrating with a set of financial services “smart rules” and an already impressive ecosystem—in everyday financial transactions while banks themselves just provided accounts? In this world, it would be easy to see how Simple really could become a viable alternative. What if Apple worked with Simple to make it really easy to open an account launched from iTunes?

We’ve seen Square go from nothing to processing sales for $4 billion worth of goods in just two years. This disruptive innovation is possible because it sits on the back of the massively successful iOS hardware and app infrastructure. Is it so much of a leap to imagine how this could extend further to consumers and our everyday experience?

Maybe this is all just a bit of fantasy fueled by a few disconnected bits of news and some crazy late night thinking. But maybe, just maybe, it’s the game no one is talking about Apple playing.

Posted by zacharyparadis at 06:41 PM | TrackBack