Apple's Mobile Payment Plans Come Into Focus

Last week, Apple announced a nifty new feature in its Apple Store app. Customers in its physical stores can fire up the app to scan a barcode with their smart phone, and pay for items through their iTunes account. For now it only applies to lower priced items, excluding the core line of computing and CE products.

While reading about it, a light bulb went off for me, regarding Apple's possible directions in mobile payments -- an area with lots of competing standards at early stages. Those include NFC (ISIS, Google Wallet), PayPal and home grown systems like Starbucks Card Mobile.

The leading standard in many peoples' eyes is NFC. For those unfamiliar, NFC stands for near field communications -- emitting a short range, high frequency signal (kind of like bluetooth, but different) to communicate data. Its largest anticipated use is "tap-to-pay" transactions.

Many expected NFC to be baked into the iPhone 4S. Those same people are anticipating an NFC-enabled iPhone5. I was one of those people but am starting to think differently after triangulating this most recent move with other things Apple has done over the past decade.

Specifically, Apple has revolutionized retail by doing many things -- one of which was to remove the counter that traditionally sits between customer and merchant. If you've ever bought anything at an Apple store, you've likely experienced one of these roving transactions.

This optimizes the physical space and employee accessibility. It probably also has some evidence of yield management and revenue optimization in the way that less people walk out of the store, leaving the proverbial "abandoned cart" behind in frustration (my speculation).

Back to NFC, one of its biggest stumbling blocks is the of point of sale hardware to receive transactions. Its cost presents a classic chicken and egg challenge between merchants and user device adoption (NFC-enabled phones). But more to the point, there's a challenge of logistics.

In other words, lines will be slowed down during NFC's early months and years of adoption. I picture check-out clerks having to provide on-the-spot tutorials; or that guy who can't stop his loud conversation or finger-tapping long enough to swipe his phone.

But beyond these factors, one thing strikes me about NFC that's very un-Apple. Its promise and its vision -- to make it easier for users to pay for things, and for merchants to track them -- is almost underwhelming. Put a different way, improving Walmart's lines isn't Apple's M.O.

This would be an improvement on a system of retail transactions (aisles, cash registers, and gum-snapping shopgirls) that's been around for years. But Apple -- as it often does -- is thinking bigger. Like it did with its own retail stores, it wants to get rid of those aisles altogether.

Its newest payment option shines a light on the "how?": Scan a barcode with your smart phone and pay on the spot using iTunes. This would require partnerships with retailers, but Apple has proven it can play nice with massive industries that it's in the process of disrupting.

There are other challenges, such as a critical mass of device penetration. Will it just be compatible with Apple devices, for example, or be accessible by competing devices through apps that connect with iTunes? Or would proprietary in-store units be attractive/economical?

Apple's wild card in all of this is iTunes. Often underrated as the asset that it is, 200 million existing customers and credit card numbers on file reduces the biggest point of friction for anyone entering mobile payments. Just ask Google Wallet, which is currently trying to build this from scratch.

Amazon is a sleeping giant in mobile payments for the same reason, but until recently had little eligible hardware in the game. The kindle and its new sexy cousin the Kindle Fire could start to lay the pavement for an installed base of hardware that's tantamount to a payments powerhouse.

The opportunity for both companies is ridiculous sums of cash. Though there aren't processing fees for Apple products bought through iTunes, there could be for third party transactions -- broadening Apples market beyond technology, to own a piece of the $4 trillion U.S. retail market.

The question is whether or not Apple will go there: it doesn't really fit the profile. All of this could just be an industry analyst and self-proclaimed geek letting his mind wander too far. But the signs are there. It's surely an ambitious vision, but when has Apple been known to do anything less?

And that ambitiondoes fit the profile -- one that Steve Jobs started 35 years ago, before creating new industries (Apple 1, iPod, iPhone, iPad) and upending others (recording industry). Retail, payments and competing standards like NFC could be the next victims.