What Apple's Passbook means to payments, loyalty and you


On Monday, Apple introduced Passbook, and my take is that it's the most important new feature in iOS6. Apple bills it as a way to store boarding passes, movie tickets, retail coupons and loyalty cards in one place, which seems simple, but the execution is elegant. Key winning points:

  • Gives brands access to the lock screen - coveted space that Apple controls completely.
  • Knows where you are, so it can have the right card or ticket ready.
  • Push enabled so updates such as account balances, coupons and gate changes are always current.
  • Is part of the OS and doesn't require the user to download an additional app.
  • Uses a simple API making it straightforward for any developer to offer the service.



Apple does not provide payment functionality of its own and some are critical of that.  American Banker characterizes Apple's actions as dipping their toe into payments and call Passbook "Mobile Wallet Lite." They note the crowded payments space and the various (unsuccessful) partnerships banks have created with Google & Sprint.  NetBanker shows more awareness and suggests that proprietary payments are making a comeback, and perhaps that banks will need to take a second seat and partner with retailers to become a preferred Passbook card.

This response seems typical of banks and card issuers -- they have been working tirelessly to defend their business model that is just too expensive, while startups like LevelUp have been chipping away with non-traditional, low-cost payment systems.  Now, Apple enters the market.  They have 400 million credit cards on file, which is more than Amazon.  While people trust MasterCard & Visa most for mobile payments, Almost two thirds of iPhone owners trust Apple to manage their mobile wallet -- more than any other financial institution, carrier or entity.  It's clear that if Apple wanted to enter into payments, they could.

Even if Apple doesn't enter into payments themselves, Passbook's architecture makes it easier for retailers to offer (and consumers to use) their own low transaction cost systems.  Aside from driving more prominence in the already strong and growing gift card space, reducing friction and cost from payments makes it feasible to offer economical micropayments at vending machines and other non-traditional locations.

And really -- if MasterCard and Visa wanted to, they could also support Passbook by creating a QR code payment method.  The challenge continues to be existing point of sale infrastructure, just like it is for NFC.

Loyalty & Coupons

Passbook will give loyalty programs a needed shot in the arm by keeping brands top of mind through geolocation, micro-marketing and targeted offers. Using push, a company could send you an offer if you're in the vicinity of a store location.  Or maybe at a competitor's location.  Imagine Target being able to send an offer to you when you're approaching a Wal-Mart -- an offer that arrives in time to change the consumers's mind.

Apps like CardKing do a fine job of storing card numbers, but since I have to find the app, I generally just recite my phone number at purchase.  And since the data is static, I miss important information like points balances, current member-only specials and other dynamic information.

Loyalty is something that Foursquare promises, but has been unable to deliver, due to the difficulty of setting up and running a campaign using their tools.  Potentially, Passbook also saves companies from the expense of developing and convincing consumers to use single-brand apps, opening up robust loyalty programs to small business.  Instead, developers can focus on the infrastructure needed to make offers, which may or may not be coupons, at the right place & time.  Further, segment the offers by demographic, last visit, and prior orders -- Starbucks probably wouldn't want to make a coffee offer to a chai drinker.

Basic oupons also get a lift.  My birthday is coming up and my email has been filled with free offers.  I think it would be very interesting to have those presented in Passbook.  Passbook could even give visibility to and remove friction from things like daily deal redemptions.  I also expect coupons to be trackable, allowing merchants to understand redemptions and the effectiveness of their campaigns on a granular level.

I also expect we'll see some campaigns originating from non-traditional marketers, such as tourism bureaus.  Maybe a city could link to its tourism pages as tourists enter the area, like Capetown does.



I think tickets will be a hit. The premise of taking e-tickets and putting them in one place is so simple, but also compelling.  I really like the thought of having my tickets in one place and I especially like the fact that the ticket I need right now (selected by time and location)  is the one that's displayed.  The fact that alerts for updated information can be pushed is just a bonus.

Merchants should like them too, as the codes are pushed from a server and can be dynamic, which gives the opportunity to ensure that the ticket is not a fake.  Implemented the right way, the remaining risk comes from device theft.

What about other smartphone platforms?

I don't think it's likely that Apple will make the Passbook infrastructure available on other platforms.  This does leave open the opportunity for competing comparable, superior or traditional services.  

I'm sure that an Android update will offer something at least comparable, but Google's challenge will be Android's upgrade rate.  Only 7.1% are using Android 4.0 or later, which suggests that even if Passbook-like functionality were incorporated into Android, it would take years to get widespread adoption.  In comparison, 75% of Apple users are on iOS 5 or newer, so expect most iPhone users to have Passbook within weeks of release.

Microsoft, on the other hand, has the expertise to execute something similar and has the right control over handset manufacturers.  Though it's a smaller installed base, I would expect rapid adoption of such a platform with WindowsPhone 7 users.  I also think the Microsoft product would be in collaboration with traditional card issuers and banks.

What do you need to do to get ready?

The first part is easy.  Apple has released iOS6 to developers and published the API. Existing app developers will have no problems adding Passbook functionality.  

The bigger benefit will come from integrating Passbook to a company's digital strategy.  

This will require evaluating the existing infrastructure and looking at the customer's experience at the point-of-sale.  Although technology makes it easier for customers to respond to offers, the experience they have at the final inch of the transaction will determine its success.  Do not underestimate the difficulty the operations teams will have in executing these transactions flawlessly.  Expect the human issues to be as difficult as the technology issues.

Rick Bollar is a digital strategy executive with experience in hospitality, lodging, healthcare, education, and global facilities management. Specializes in delighting digital consumers by delivering innovative experiences in areas such as mobile commerce, local commerce, payments, nutrition, social media, micromarketing and customer loyalty. Engineers processes to allow enterprise systems and human assets to successfully execute a digital strategy. Brings a quantitative approach to digital marketing, ensuring digital, e-commerce and social initiatives have a measurable ROI. Background includes financial leadership, technology deployment, and enterprise-wide reengineering accomplishments.

© The Bollar Organization 2012