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Summary:

Apple’s Passbook joins the mobile payments gold rush. But Jeff Fagel, of edo Interactive, has doubts about its viability and says until we see a system that’s easier for everyone, plastic will remain king.

empty wallet
photo: Shutterstock/Pressmaster

This fall, the launch of Passbook marked Apple’s first foray into the crowded arena of alternative mobile payment schemes. Considering its well-founded reputation for producing disruptive tech, it’s tempting to assume Passbook is destined to do the same. And there’s certainly an argument to be made that the company has some distinct advantages in its favor – not least, a fanatical and still-growing iOS user base of tens of millions in the U.S. alone.

But a few high-profile failings have shown that the company is indeed mortal, most recently with the high-profile implosion of Maps, or the ill-fated Ping – Apple’s half-hearted attempt to shove social networking into iTunes that was mercifully cut short (in favor of integrating Facebook and Twitter).

Before weighing in on Passbook’s fate, let’s first look back at some other potentially disruptive digital commerce technologies in the past –both successes and failures – to determine what crucial elements will be required to hit critical mass with consumer adoption.

The Losers

Let’s start with the losers. Remember Flooz? (No? Exactly!) The late ’90s dotcom paid precious startup cash to Whoopi Goldberg to promote an alternative currency to be used just on the Internet, but it was offering a solution to a problem that didn’t yet exist. The need for an alternative form of payment online was simply not clear to consumers at the time. It failed to attract merchants and users and was eventually shut down after about two years amid a bankruptcy filing.

More recently Facebook – certainly another obvious pick for assured front-runner status – killed off its own high-profile foray into virtual currency. After three years of trying, the company unceremoniously shut down Facebook Credits in June, opting instead to focus on beefing up its payments capabilities.

And then there’s Google’s efforts to do away with the physical wallet. While it’s too early to dub it a loser, the company has been tight-lipped with data around transactions processed via Google Wallet. And continued media coverage points to slow adoption, and leads to questions around its necessity. While the wallet-free concept is appealing on the surface, the rub it seems is that the effort on the part of the merchant is complicated and costly.

The Winners

PayPal was among the earliest contenders to seize on a market opportunity that many major credit-card companies and traditional commerce outlets missed (or underestimated). By providing an easy way for people to pay online without having to sacrifice time or security, PayPal offered a simple solution for a problem that was emerging alongside the rise in e-commerce and especially online peer-to-peer marketplaces like eBay. PayPal will now try to extend its reach offline having partnered with Discover Financial Services and multiple retailers, including Home Depot and Barnes & Noble.

Another standout market transformer – which, notably, primarily benefits merchants – is Square. Using a postage stamp-sized dongle, Square has significantly expanded the offline commerce market by enabling anyone with a smartphone to sell anything, almost anywhere and anytime. Its traction has been measurable, and it recently announced that it is already processing more than $10 billion in payments a year, with some three million merchants using its service. A recent deal with Starbucks should help propel user adoption dramatically.

If it’s not broken…

The key with both winners is ease and convenience — both PayPal and Square require little effort on the user’s part, but offer high value in return. PayPal builds on something most people are already using, namely online commerce , but adds the critical element of security.

And Square requires a fraction of the investment on the part of the merchant compared to traditional POS card readers – which can cost $10,000 to $15,000 – and actually makes the transaction easier for all parties involved. Let’s also not underestimate the appeal of the ‘cool’ factor with Square. As an example, take your local food truck, which now has access to cutting-edge technology enabling it to deal with potentially more customers; consumers benefit by simply being able to quickly sign their bill with a finger and receive an instant email receipt. Because of these ease-of-use advantages, Square has exploded while mobile wallets have at best lingered, with none poised to catch on.

Recently, I attended the Money 2020 conference in Las Vegas where attendees and speakers were providing a reality check on the state of mobile commerce. In one session, Jennifer Schulz, head of global product strategy at Visa, summed up the issue succinctly: “There won’t be mass adoption of mobile payments until there is a better consumer experience beyond the card.” I couldn’t have said it better myself. (Full disclosure: I work at edo, a card-linked offers provider).

Duplicative vs. Daring

Companies looking for innovative ways to engage with consumers, especially around mobile payments, should first and foremost focus on building solutions that are easy for all parties involved  ̶  consumers, banks and merchants  ̶  and that tap into a long-standing need in the marketplace. In the case of Passbook, the problem I see is that it’s not layering anything new onto my iPhone experience. To the contrary, my question about Passbook is why I need it, when I already have all the apps I want on my smartphone.

Even at this early stage of its functionality, Passbook should be more than simply an aggregator of digital cards and instead offer something truly unique. Currently, users must first download the brand’s mobile app (Starbucks, United Airlines, Sephora, and so on) and then connect the app into Passbook. Early users are finding this process confusing and duplicative, expressing frustration around the manual work needed to add different cards and services into Passbook, with limited return. In addition, the number of participating merchants is still very limited, and even those that exist often offer restricted availability. For example, McDonald’s has integrated with Passbook, but (curiously) only in France.

Passbook then is at best a novelty at this point. While there’s certainly the possibility Apple will revamp the app wholesale, and in turn gain meaningful traction, I’m more inclined to put my money on the bet it’s destiny is to join poor Ping in the ignominious Apple Graveyard. I think that nothing will replace ubiquitous credit and debit card payment systems until a service comes along that is a dramatically simpler solution, or offers compelling additional functionality that encourages people to leave their cards (and wallets!) at home. Given Apple’s dominance as the mobile device of choice around the world, Passbook has as strong a shot of success as anyone, but only if they figure out how to overcome these limitations. Until then, plastic will still be king.

Jeff Fagel is Vice President, Marketing and Brand Development at edo Interactive. You can find Jeff on and Twitter.

Photo courtesy of Shutterstock/Pressmaster.

  1. Jeff,

    Agree with your point that Passbook is not used to its potential as of now.

    Paypal – Even if it caters the e-commerce space, its audience is different from that compared to Passbook and Square. Passbook caters the e-commerce happening with mobile users. I see Paypal as like any payment gateway of credit card companies or other operators.

    Current adaptation of Passbook as you said is limited to prepaid cards. But it does have potential in taking mobile-payments to another level and it will be limited by the imagination of App developers.
    Compared to Square, Passbook has an advantage on the equipment the seller needs to have – Its needs the Barcode scanner which is already available. But still that have some limitation, but something which can be tackled.

    My views on Passbook’s future is captured on this blog http://techcurrents.wordpress.com/2012/10/25/evolving-ecosystem-around-apple-passbook/

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  2. “Given Apple’s dominance as the mobile device of choice around the world”

    While it may be true that the iPhone is the #1 smartphone model around the world, it is not dominant when compared against the aggregate of non-iPhone models, which is more relevant in the context of Passbook’s future.

    I don’t understand the value of Passbook yet. As the author states, I already have and use the 3 or 4 mobile payment/pass apps that I want. I don’t feel the value add from Passbook.

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  3. I agree with many of the arguments. But where passbook really adds value is to mobile websites and that means all the html5 stuff coming up. Since iOS6 you can push coupons directly to passbook via html. Here I see substantial leverage assuming the massive reach within the browser. Especially if you think of mobile advertising features. For apps I agree it doesn´t adds value.

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  4. Passbook does not require apps at all. I think it is brilliant. When I recent purchased Coldplay tickets for my family, I received an SMS with a link. I clicked on the link and – presto – all of a sudden I was asked if I wanted the tickets in Passbook and all I had to say was yes. At the concert the tickets magically appeared triggered by the GPS. How good is all that? Previously, we used to loose and misplace tickets everywhere. This is so easy to use. I hope more merchants adopt it.

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  5. I don’t think mobile payments is the right arena to judge passbook. What will kill it is Google Now IF Google expands on something they’ve just recently done. Now can pull info from your gmail and display relevant ticket and reservation info based on time date and location. It parses this info from email. So what if Google offers an email API? Basically a way to format the email so that Now can grab all types of info like offers and reward cards info. Now all you would need to sign up for these things is your Gmail account. Info can be periodically sent to your email and Now will surface it when its relevant. No need to do any app integration or sign up for any program on the part of the vendor. For rewards cards a barcode can be surfaced from the email and a link to manage prepaid or gift cards in the email can be turned into a manage or recharge button on the card. Boarding passes would work the same way. It would make Passbook look like a hassle and unattractive.

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  6. Reblogged this on Tech Bytes Xpress and commented:
    I agree on all points regarding Apple Passbook. It seems like a half ass attempt to compete with options already available. I think they missed the boat on this one. -Eric

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  7. Onno ter Wisscha Sunday, November 25, 2012

    Passbook fails at a very basic level: half of the barcode scanners I tried can’t read from the iPhone screen. Having to bring a paper or plastic backup just to be sure is completely defeating the purpose.

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  8. Completely agree.. “users are finding this process confusing and duplicative” – EXACTLY! It’s pointless when I would much rather open the app on its own without having to go through Passbook, much like Newsstand.. Its a waste of time.

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  9. It’s the card issuer’s choice to distribute via app that you are criticizing. Your other beefs are merely because it’s early days. Thinly disguised Apple hit piece.

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  10. Please have a [substantially more] technology oriented person break the technical aspects down for you. I am sure you will find many of them in your line of business. As for the convenience factor of passbook, it will get better over time. The only shame is that Apple is making this technology available to those developers who pays the Apple Tax.

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  11. I use it almost daily at Starbucks, and I just used it for a concert where the ticket seller offered it has a paperless option. I particularly like its location-aware feature. Ping was a useless half-baked attempt at selling more music by having users overtly do all of the work. I don’t see any similarity between the two, and their lack of use is for different reasons. More adoption of the Passbook standard and a bigger push by Apple is all that’s really needed. I think you’ll see Passbook come into its own in the long run, not fade into the oblivion like Ping. Passbook is a long-term play.

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  12. Thanks for the article Jeff. There are a few misconceptions surrounding Passbook, which I’d like to clear up.

    1. Passbook does not require apps. In fact our firm Passjoy.com just released over 2000 coupons, no app required. Just log on to our website with your iPhone and start downloading passes. Yes, it’s true a user needed a Starbucks or Walgreens app in the first few weeks, but those were just the very early adopters. I’m sorry that it created confusion for consumers (and it truly did) but after about 15 seconds using a system like ours, any such confusion instantly disappears.

    2. Passbook is not a payment system. It’s a coupon and ticket system, and by extension, a mobile marketing tool. Comparing it to credit cards is comparing apples to oranges. Note that the market for coupons, ticked, and mobile marketing is just as big, if not bigger, than mobile payments. As you pointed out, credit cards work very well. That’s why Passbook is not a payment system.

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    1. I just checked out passjoy.com. I was a bit surprised. I had only thought of Passbook as a convenient way of doing stored value cards and tickets. I completely missed using it for coupons. Now that I see its use for coupons, I can see huge upside for marketers. Good job on the site.

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    2. @Jim Passjoy is a disappointing example which embodies almost everything people hate about affiliate marketing and spam. Passjoy coupons contain no barcodes and are not scanned to redeem. Instead users have to flip the pass where they are coaxed to click on an affiliate link. Passjoy does not appear to be endorsed by any of the brands represented in their passes which will only further confuse the public.

      This type of abuse of the Passbook platform will be exactly what propels Passbook towards an early demise.

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      1. Hi Daniel,

        Thanks for your comments. I have to admit, we never thought of it this way when building the site. And truthfully I don’t understand why you would object so strongly. Not to be defensive..I just don’t understand.

        So I hope you don’t mind if I take a second to respond as thoughtfully as possible…

        - How could this be spam? Anybody who doesn’t want to use the coupons doesn’t have to. We aren’t mailing them to email boxes or anything.

        -If anything, we are easier than most other Passbook alternatives. In other Passbook distribution methods, for example distributing them by Mobile app, the user is required to jump through a lot of hoops to add passes. There have been hundreds, (and I mean literally because I counted them) of complaints online from consumers who are frustrated by having to load an entire mobile app just to get a few coupons. Our system therefore is MORE user friendly, not less as you imply, because you don’t have to make a lot of effort to get our passes.

        - These are standard coupons, the kind that hundreds of different sites on the web distribute, and which are enthusiastically given out by merchants. Saying our coupons “aren’t endorsed” is simply not true. These coupons are sent out by merchants specifically for approved distributors, like us, to send.

        - We are distributing coupons via Passbook the same way that other vendors are distributing coupons via Passbook. We aren’t even the biggest in the market, we are a small startup.

        - Unlike a lot of other Passbook coupons, ours have a rich design. We made a huge effort to raise the quality of coupons in a way that really uses the higher resolution screen, and technological superiority, of the iPhone, in the way that Apple products in general have emphasized richness and graphical beauty.

        - Many, many coupons on the market are not scannable. There are 4 or 5 different types of coupons which are used on the web by the thousand. Printable, online, coupon codes, in-store codes, you name it. You seem to be suggesting that only 1 of those 5 categories — scannable coupons — are valid for Passbook, and that all others are somehow “bad”. Huh?

        - What do people “hate about affiliate marketing”? I’m not sure I get that at all. I mean, yes marketing happens on the web, but that’s how most websites are funded. And with Passjoy, the only people who are going to get our passes are people who specifically made the effort to go to our site and download our passes. So we aren’t even popping up advertising in unobtrusive places, or sending emails, or doing any of those things that irritate people.

        - From every perspective I can think of, Passjoyis *less* spammy, and *less* intrusive, than any other marketing technique in the online world. Passbook is for coupons…that’s right in Apple’s tagline. Passbook was designed from the ground up for coupons. So again, how could our coupons…representing as they do, a huge chunk of the world of coupons…be so objectionable?

        - If we are going to object so strongly to these coupons, which again, are what Passbook was built for, then how many other uses of Passbook will you object to? There are thousands of potential uses..it’s a huge and fantastic platform, and right from the start, we’re going to disapprove of of something this simple?

        Daniel, you are entitled to your preferences of course and may critique in any way. I hope we can keep building better and richer Passjoy coupons and lure you over to Passbook shopping :)

        And finally, anybody who feels strongly one way or the other about Passjoy’s coupon style, please please contact me any time. We think this is grand fun and great new technology, we are Passbook fanatics and were exploring the format from the day it was introduced, and work late nights trying out different Passbook engine tricks. We really want to hear anything, good or bad.

        Regards,

        Jim Bonner
        Passjoy

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  13. I’m sure succeed or fail passbook will evolve to something else, so technically you will be right. Needless to say its too soon to declare passbook a failure. I agree that it’s a novelty at this point but you are missing a large part of passbook functionality if you are just focused on payment. Even just focusing on that; at some point having to carry plastic around will go away. Passbook takes a swing at the inevitable.

    -Scott Gale
    scottgale.com

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  14. Passbook is great. Although buying a bunch of tickets and not being able to share from passbook to passbook makes no sense. This has been the issue with Apple design of late – and by design I’m talking app / digital service design. They miss the obvious all too often. Apple is very mature on hardware, but seems to lag in certain types of software.

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  15. “To the contrary, my question about Passbook is why I need it, when I already have all the apps I want on my smartphone.”

    Sounds about right. A sorta nerd saying that passport will not work cause they don’t like it. Yep, that is why Apple is doing so badly. LOL

    Passport is credit cards in your pocket / in your phone. No carrying tons of cards for every function under the sun, one phone to “rule them all” sort of thing. Of course you could say that Android dominates the world cause they give more phones away, but 85 to 90% of internet access is thru iOS devices. Black friday had 88% iPads vs 2% Galaxy 3 and 4% nook and kindle.

    I say wait 6-8 months and see what functions are growing. Me, I have already used passbook for Airlines and coffee. Just a thought.

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  16. I think Passport is more useful than is being suggested here. It provides a simple process to obtain and use mobile tickets for such services as airlines, concerts, galleries, etc. I consider that Passport is a much more elegant approach to mobile payments for consumers than NFC, electronic wallets as per the ratings in the main article. Passport has a way to go, but speaking to businesses using Passport advise that the backoffice operations for Passport are cost-effective and straightforward to use.

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  17. Why do certain individuals knock off a product assuming, it is perfect from the get go? That seems very disingenuous, especially when a person – without trying it themselves – treats it like it will lose. This even more true, when a person does not talk through the provided Company channels offering their two cents to improve it.

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  18. Jeff, you clearly haven’t done much research into this product or indeed experienced the true convenience of it.

    There is no App required to load a pass onto your device. Click https://pass.is/subway into your phone and you will receive a pass. The main reason that early adopters have integrated Passbook with their Apps is their IT teams, who are so much in love with their in-house Apps that they can’t bring themselves to face the fact that these Apps are now redundant.

    I for one am fed up with Apps – every time I switch on my phone I have a bubble telling me half a dozen or more need updating. Passes can silently update in the background, or can actively inform me when there are new offers to see.

    Apps require my private information and an Apple account – passes do not.

    Apps are notoriously difficult to update and new versions can take days and weeks to get through Apples approval processes. Passes have zero restrictions and using services like passk.it, you can create and update a pass in seconds with zero coding.

    Passes are the future, wake up an smell the coffee before you commit edo Interactive to the graveyard.

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  19. What google has done which is smart, is ask people to register bank details when signing up for Google music. 0 Charge. This free service will pull loads of people, it’s free music! At the same time as getting a host of bank details which will integrate into Google wallet and give them a strong hold over the amount of users. If they have more users then more retailers will adopt whatever technology Google decides to offer. They also have 75% of the smart phone market with android, as well as opening up their payment API for integration with other apps, I think they’ll come out the winner

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  20. I hope Apple can make Passbook work and be a success. I just have a few Passbook items (fewer are available for use in Canada), but I appreciate them a lot. Anything that gets loyalty cards and specialized cards like Starbucks out of my wallet will make me happy. The potential is endless, I just hope they get it right.

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  21. My problem with Passort is that I’ve been using the third-party Key Ring app for some time, which is easier, more intuitive, and again, already on my home screen. I can’t find the value in converting from that to Passport, which is far more clunky.

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  22. Jeremy Agulnek Monday, November 26, 2012

    Jeff,

    I respectfully disagree with your Passbook commentary. In fact, Apple has taken the exact approach that you suggest for all to follow (“easy for all parties involved”). The greatness of Passbook is in it’s simplicity – it’s not looking to be a replacement mobile payments platform rather to significantly reduce the friction that consumers currently face in today’s offline world of paper-based coupons, dozens of plastic loyalty cards, and printed boarding passes.

    In full disclosure, I lead the Product Management team at Vibes (a mobile marketing technology provider) where we have developed a Passbook mobile marketing platform that enables marketers to deliver content directly to Passbook without requiring the consumer to have any mobile app downloaded on their device. I’m excited about the hands-off approach that Apple has taken (so far) in creating a mechanism for brands to extend their current capabilities into the digital wallet without having to re-construct processes or make major technology investment. I think Apple could do more on consumer education about Passbook, as it’s definitely not a household word so far, but it’s still early on.

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  23. ” until we see a system that’s easier for everyone, plastic will remain king.” says the guy who’s business relies on plastic.

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  24. Love the debate, a lot of emotion. I’ll keep it constructive
    So, my point is this: Will Passbook be more than simply an aggregator of digital cards and instead offer something truly unique?
    Granted early, is Passbook now so different than @Cardstar? While there’s certainly the possibility Apple will revamp the app Passbook I’m pushing for it to be more than simply an aggregator of digital cards/coupons and offer something truly unique.
    A few observations
    1. Jim @passjoy “15 seconds using a system like ours, any such confusion instantly disappears?? Not so sure about that — are these simply affiliate offers? Tend to agree with Daniel, not so simple 1. Load the pass 2. Click on an affiliate link 3. Drive back to a 3rd party website Maybe I’m missing something, how is different than http://www.retailmenot.com/?
    2. Comments around Mobile payments ‘not the right arena to judge passbook’ are fair. Mobile Shopping is one of the many ways of using Passbook (see Starbucks integration) so then is Apple aiming to be your Mobile wallet? Or a mix between: @Belly @Levelup and @retailmenot
    Thanks for sharing your comments
    Jeff
    @jf1216

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  25. I’m a bit of a coupon fanatic and quite the shopper (my secret vice) and so can perhaps offer some perspective.

    Passbook has a lot of potential as a shopping tool because it can take the place of many different vendor apps that I would have to otherwise juggle. I don’t care about using it to pay, but if it helps me get more coupons for a trip, that’s real, significant cash savings, tens or hundreds of dollars I can save. Multiply that by millions of people shopping, you are talking about a big impact.

    I also played with Passjoy and enjoyed it. instead of saving coupons into my Retailmenot app, I save them into Passbook; about the same number of steps, but coupons centralized in a single place.

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  26. Srikanth Rajagopalan Wednesday, November 28, 2012

    You’ve nailed it: scalability and interoperability are the two of Passbook’s critical shortcomings.

    Consider also the strategic rationale: don’t forget the awesomeness of focus.

    If payments is one of your hobbies, you’ll do a cool job, get a few oohs and aaahs from the fanatics … and then quietly go where a whole bunch of such stuff vanished. It’s great for Apple and Google to throw around a few billion at these projects while the going is good, but I’d wager these will be the first victims of the inevitable business cycles. Just ask Nokia how gut-wrenchingly awful that decision must have felt, as necessary as it was, shutting down Nokia Money in emerging markets.

    I’d put my money on the payment networks actually growing digital chops faster than the tech tribe learning the plumbing behind payments. Mobile *payments*, and not *mobile* payments.

    Here’s a great article on the subject from Greylock Partners that lays out a good scenario: http://www.forbes.com/sites/bruceupbin/2012/03/01/the-credit-card-is-the-new-app-platform/

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  27. This article presumes that Passbook is intended to become a mobile payments device, which is rather a stretch. Apple has stayed away from mobile payments (why get into a low margin business for which there is little demand?) and instead built a platform on which others can try and add value to the customer on the phone. And with the installed base of iOS5, we’ll see a lot of developers trying to make Passbook useful, by solving problems. And magstripe cards in the US are not seen by any consumer as a problem.

    So yes, I agree with you that plastic cards will be used for payments for a long time. But let’s not argue that point by claiming something not intended as a payment card replacement does a poor job at replacing payment cards.

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  28. I tried using PassWallet — Android’s answer to Passbook, and found it way too complicated for what I wanted, which was a way to digitally store my customer loyalty card (which is just a barcode) in the system. Granted I tried to create my own pass rather than use an existing one, but it’s not as easy as “Key Rings Reward Cards” available in the Play store.

    As for the mobile payment arena, you’ve got a whole range of companies with a whole range of apps that do similar, but not exactly the same thing. I demoed Google Wallet in Australia (using the ol’ prepaid card / MarketEnabler trick, because it’s not officially supported here) and I loved it. I paid for two coffees at McDonalds and it was dead simple — open the app, pop in your pin, hold your phone to the terminal. Not as easy as Visa PayWave (which requires no PIN or signing for purchases under $100) but still very easy. The problem was, as I mentioned, lack of availability. It’s not available in Australia (despite Google Wallet’s online version being available — it’s how I pay for apps in the Play Store) and in the US, it’s being blocked at the carrier level because they have their own payment method they’re trying to push — too many cooks spoil the broth in my opinion.

    In Australia, Vodafone (which is a minority network compared to Optus and Telstra) is trying to add their own contactless payment app to their “branded” Galaxy SIII (and other NFC enabled phones), but you must manually recharge it after $1000 of use. $1000 is quite a fair amount for a card, but try getting stuck with no funds while tapping your phone.

    Mobile / contactless payment won’t really take off because there are too many companies bitching over whose is the best, even though they’re all the same.

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