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Apple's iPhone Offers the Ideal Micropayments Platform

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I was playing Texas Hold’em on the iPhone the other day when it struck me: If Apple (s aapl) 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.

48 Responses to “Apple's iPhone Offers the Ideal Micropayments Platform”

  1. We have the only mobile micro-payment solution that covers 96% of the US and European subscribers, see here: Thanks to our frictionless user experience we convert web visitors into buyers at a rate of over 10x compared to traditional payment systems (credit cards, …). We power over 80% of the top 100 Facebook and MySpace apps that monetize, AND… we have a solution for mobile clients based payments with developers integrating Zong on Android and Nokia. Zong also technically works for iPhone and could enable try-before-you-buy app downloads and in-app payments for virtual currency and virtual goods. The only issue here is that the Apple iPhone’s terms of service restrict in-app payments at this stage. This is something we’re working hard on resolving.

  2. Thank you Faissal !! This paymo website is just great ! I just registered and I can start selling my online game services and social network to consumers in roughly 40 countries who have only a mobile phone to pay ! No need to say that I have never been to so many countries and I can start doing business there from my office in LA ! Thanks a lot mate and I owe you a good one ! I have been looking for something simple and straight forward for months and it was just there ! Muchas Gracias Amigo ! I am a Paymo fan now !! Thomas

  3. Online micro-payment is already a reality and a growing reality. Thousands of online merchants request it ! That ‘s why Paymo was set up for online digital merchants, allowing consumers anywhere in the world to buy online and pay with their mobile phone. 70% of the world’s online population has no credit card.
    Paymo is already famous on facebook (with Playfish for example) and tens of new online merchants register every single day. Paymo has opened the door to 3+billion new consumers with an easy click. Try he demo on and sign it as a merchant ( to start billing the whole world.

  4. anonymous

    Why not use SMS with a premium short code for micropayments ? I mean for applications like facebook gift shop etc it might be easier to use SMS, since most of facebook users will have a mobile phone.

  5. We are already doing this in various other applications on platforms like myspace and facebook, in fact on exactly the types of applications you mention. We monetization well over 300 myspace, facebook and stand alone virtual currencies.

    We have a quick and dirty mircopayments platform for the iPhone already implimented and are looking for more publishers to use it. A much more sophisticated version will be rolled out in a few weeks.

    Feel free to contact us if you want to hear more.

  6. This is a very good idea. I think it could be applied to any phones with a similar format. Ever since I started working with Motorola I have become a huge fan of the Krave. It has some of the same features, and I think a built in micropayment system would be great. It’s a fairly new phone, so if you haven’t seen it yet it’s online at I wonder if they will jump on the bandwagon when/if a micropayment system is implemented.

  7. In app micropayments would be huge, but what would be even more huge is if you could just use iPhone apps within iTunes. I know as developers, we get the iPhone simulator tool, so I don’t think it is too big of a hurdle to make that a feature of the mac iTunes. Would totally knock down the barrier requiring iPhones or iPod touches.

  8. Om, I would flip your question the other way. Why WOULDN’T Apple build a micro-payments network when you already have millions of people walking around with iPhones (and just as many with iPod touches) who are already trained on micro transactions for impulse buys like music and games. In fact, I think that Apple has filed a bunch of patents around in-store contextual information and media systems that interface with iPhone in a value added fashion. Payment transaction processing/handling is a natural overlay as it opens the door to all sorts of interesting impulse buy plays.


    Read: Apple’s Mobile Gaming Gold Rush

  9. Back when PayPal was just starting to get popular, they had a Palm app that let you beam money directly to another person via the infrared to their own Palm. It was quite the convenient little system but they ended up yanking it long before they were a glint in eBay’s eye. I don’t know why.

  10. 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 site. Once the merchant is setup (provided with a merchant number) customers of TreasureCom’s 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%.

  11. @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.

  12. 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…

  13. 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.

  14. 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 …

  15. 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.

  16. 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.

  17. Mike Cerm

    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.