The Smartest Thing About Apple's Passbook? It Isn't Called a 'Wallet'

by Steve Smith, Sep 20, 2012, 11:28 AM

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With the release of iOS 6, Apple does try to address an actual pain point in the shopping experience that mobile can help solve. But it is pain that mobile partly helped to create. I have tons of mobile coupons on my phone, all essentially hidden and forgotten across equally countless branded apps. The closed system that is app content has always been an issue for app discovery, because app content is isolated from the mobile Web search ecosystem. But app silos are also an issue for app utility to users. It is hard enough to remember the apps I have -- let alone which ones have coupons ready for redemption.

At the very least, the iOS Passbook idea is addressing the problem of m-commerce fragmentation across too many apps. The new Passbook app was introduced yesterday, baked into the version 6 update. And now we are starting to see a flow of brands revising their apps for compatibility with Passbook. Fandango, Live Nation/Ticketmaster, Sephora, Walgreens, Target, MLB, and others are already integrating the two apps.

Both Sephora and Walgreens loyalty cards are in the app on my phone, I open the app and can simply tap or swipe to bring up the brand pane with the scannable rewards/loyalty code on screen. Oddly enough, the one app I most likely would use for this is Starbucks, which has not updated its app for Passbook compatibility.

I think this could be a big deal -- for Apple, major retailers who play along, and for the entire concept of a mobile wallet that ultimately propels m-payments. IHS just projected that the inclusion of Passbook and its own maps in iOS 6 will increase Apple App Store revenue from 2.9 billion in 2011 to $4.9 billion this year. “With iOS 6, Apple is moving into real-world location and financial-transaction features,” says IHS Senior Principal Analyst for Mobile Ian Fogg in the brief. The combination of its own maps and wallet and location services will be a key driver in growth. In fact, the industry research firm says the revenue Apple will see moving through the App Store this year will amount to half of the revenue it has seen since the beginning of the App Store.

The shape and appeal of the mobile wallet will become increasingly important in the next year as we see mobile payments begin to emerge in various forms. I think the m-payment world finally grasped the obvious -- that having people use their phones as a payment device was a solution in search of a problem. The wallet is the selling point, and not because people want to replace their physical wallet. In fact, I think it was probably a quietly brilliant move for Apple to avoid the “wallet” metaphor and naming in crafting the Passbook. The term mobile “wallet” almost invites people to ponder negatively why they would want such a thing. It defeats itself with over-ambition. In some ways, the virtual wallet is asking us to replace something we are at least as attached to emotionally as our phone. How many very intimate mementos are in your wallet? A less committal Passbook at least has the merit of avoiding that comparison.

But the Passbook does seem to address a real need to move the mobile loyalty cards, coupons, offers, gift cards, etc. into one place. The fragmentation of effort that apps represent for most users tends to undermine rather than further the cause of virtualizing these physical promotional tools on the phone. I don’t want to have to do a typed search to surface my Starbucks card on the iOS deck. I suspect the Passbook will make a compelling case to those who have tried to mobilize these card and coupon functions but just found managing all of them on the phone deck more cumbersome than having them stuffed in a real wallet.

A mobile wallet ultimately succeeds when it becomes a habit. With upgrades to iOS most likely to reach 80% of the installed base, there is a ubiquitous, first-page presence for the operation on all Apple phones. There is a cumulative and cross-vendor effect to this. The passbook is designed to show all of the logos of all the cards you have stored. This not only makes the app easy to use, but serves as a persistent reminder to the user of all the mobile resources they have.

Given the importance of the wallet/passbook as a concept on smartphones, I am hoping to pull together some big thinkers on the topic for our upcoming OMMA Mobile M-Commerce event in LA Oct. 22. We are doing a special edition of the five-years-running OMMA Mobile series just on various dimensions of m-commerce. I think the components and functionality of the mobile wallet and the ways to make virtual loyalty cards, coupons and gift cards of added value on phones are things that brands need to get right and experiment with long before the payment systems come online.     

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