I was playing Texas Hold’em on the iPhone the other day when it struck me: If Apple allowed one-touch financial transactions inside apps — in the case of Texas Hold’em, for example, to buy $1,000 of poker chips for $1 — the consequences could be huge. […]

I was playing Texas Hold’em on the iPhone the other day when it struck me: If Apple allowed one-touch financial transactions inside apps — in the case of Texas Hold’em, for example, to buy $1,000 of poker chips for $1 — the consequences could be huge. Social networks like Facebook and MySpace, games, location-based services and pure-play commerce apps could see instant windfalls with the right functionality.

Apple is in the catbird seat to dominate micropayments. Their “batch and bill” implementation in iTunes, which boasts perhaps the smoothest online purchasing UI ever, now serves as a foundation for the App Store, creating a whole new genre of software that I call “impulseware” — cheap enough and easy enough to buy on a whim. I’ve already spent a total of $22.99 on apps for the iPhone — some useful, some not — since the App Store launched in the summer. Just getting people to spend on software is a feat; I, for one, haven’t spent money on software anywhere else.

I would be spending a lot more if Apple extended the API to allow for the ability to transact within apps. It would give real viability to virtual gifts, currencies and goods across the myriad of apps out there by allowing pennies and dollars to change hands in a frictionless way. As both a developer and a consumer, that is exciting.

There is potentially a lot at stake here. As we shift toward the mobile web, we are seeing a repudiation of the browser as the single, über app. Apple has already re-inspired (and perhaps revitalized) the vibrant shareware industry; it now has a chance to legitimize new online business models. Such a move would allow those of us in the tech industry to move away from our uncomfortable dependence on the “media model” that has informed web development for the last 15 years or so. And by offering new options for generating revenue, Apple would get a leg up on Android in the battle for developer mindshare.

The carriers have had ample opportunity to spread their own payment platform, but instead their various handsets and typically unfriendly strategies toward developers have opened the door for Apple. The company, after upstaging the music industry titans, stands poised to extend their revolution of content delivery to that of application delivery — and in the process, to sell even more devices.

  1. If the best example that you can think of is a gambling application, then you’re crazy if you think that Apple would ever allow this.

    However, if properly implemented, this could be great for Apple’s bottom-line. This wouldn’t be the first hugely lucrative opportunity that Apple has passed up. Steve Jobs has his own plan, and it’s neither governed by logic, nor by consumer demand.

    Furthermore, I don’t think that Apple would want to get further even deeper into the businesses of the people who write apps. They already have to bear responsibility for any errant app that ends up in the marketplace. If any app had the ability to charge you money for goods or services, that would open Apple up to more liability. I just don’t think they want that.

  2. Very interesting. I think you are on to something.

    I would very much like to use my iPhone as a form of payment – I know this do this in other parts of the world. I’d love to be able to wave my phone to buy a cup of coffee or a book.

  3. I think Mike really nailed it on the head with his last point. There’s already minor security issues being discovered, as apps try to do all they can on the device, including getting permissions that native apps have. To allow for transactions in developer apps allows for a lot of incentive to create exploits and steal real money, not just data. For that reason, it would be a really long time before you’d get something like transactions in developer-created applications, if ever.

  4. Interesting post but why would it need to be apple. Micropayments and payments processing is a big business. You already have Paypal, Amazon and Google Checkout in it among others.

    Mike did make a point about apples liability. Apple can create a payments platform like paypal (iTunes and Appstore are not paypal ) but it does not exist yet.

    Even if it did exist why would a developer use Apple payments when there are so many competitors out there? Apple takes a nice 30% cut (which is significantly more than a payments processor) Paypal and Amazon would definitely offer better terms. ..

    Appstore is succesful because of a variety of reasons. Convenience is high on the agenda but most of the money I have spent on the appstore is for games and the quality of games which exist. People pay money for games on any platform. It is a well known business. The point I am making is that Appstore is not just succesful because it abstracts payments away or the fact that I have an account with apple … As a dev trying to make micropayments money I would use Amazon payments etc .. It would be also nice for Amazon payments to launch a library to enable this …

  5. Narendra you are definitely seeing the future. It’s such a natural expansion and I have to agree. Apple will of course be hyper aware of who they allow to access such a service, but even if it starts with 20 apps (movies, amazon, donate to Red Cross) they’ll get to games eventually.

    Android will also not be scared to go where Apple isn’t. Google is desperate to find a new revenue stream to finally match adsense and I bet they’re willing to dive in whole hog.

  6. Good direction, definitely an opportunity for creating a new market.

    Three points though:
    * It seemed like the app-buying mechanism was piggy-backed onto the existing iTunes system (I get receipts for free items, etc). How smooth will the transition be to an in-app model?
    * Apple needs to rid itself of requesting user’s iTunes password every time they do something. I don’t know if they need to defend themselves from 1-click patents but they need to take out this extra step, or at least allow us (I couldn’t find a way to kick it out).
    * How will revenues be split? 70%-30% like the existing model? I’d call it unfair towards developers, yet if its not the same as the existing models Developers will be taking advantage of that which will hurt Apple in the longer term…

  7. @Yuvamani Apple may not be paypal, but the suggestion isn’t that Apple become a third-party payment provider, but rather that Apple provide a built-in interface for first-party payment arrangements.

    The ability to instantly enable purchases inside of any app that wants it, just like any app can implement location-based services, is a phenomenal one. Giving developers a quick-and-easy API to what could essentially be micropayments (or macropayments) could potentially be very lucrative.

    If Apple wanted to allow it, this could expand out dramatically in several directions. Heck, Amazon could even write an Amazon app that let you buy things from your handheld and pay them from your iTunes account (impractical, but possible). Adding money to your Starbucks card or transit pass would be another great problem-solver.

  8. Great point, Narendra. One of the projects my team has in early Alpha is aiming to serve a small (huge) part of this global opportunity. Would be happy to discuss with you about it.



  9. There is a mobile micropayment system available today from a company called TreasureCom. Any website (merchant) selling products/services may sign up on the company’s http://www.autositebill.com site. Once the merchant is setup (provided with a merchant number) customers of TreasureCom’s http://www.mworldPay.com services can then make real time purchases, using their registered mobile phone, at the merchant’s website.

    One of the advantage to a customer using the service is that the customer does not have to provide either TreasureCom or the merchant with a credit/debit card or bank account information at any time during the process. A customer can push funds (without exposing bank information) from his bank account directly to his mobile phone account at mWorldPay. In addition the customer may use cash and purchase at a retail location a prepaid disposable telephone like card with predemoninated amount and use text messaging to transfer the funds from the disposable card to the mWorldPay account. The customer then uses the funds in the mWorldPay account to make a purchase.

    Some of the advantages to the merchant is that (a) the merchant can accept micropayment, (b) there is no chargeback (c) their is comprehensive reporting available (d) the maximum cost to the merchant is 1%.

  10. [...] on GigaOM, Narendra Rocherolle ponders the thought of the iPhone as a micropayments device: I was playing Texas Hold’em on the iPhone [...]


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