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Verizon iPhone and the Year of Mobile Payments

2011 January 11
Verizon iPhone

The iPhone is finally coming to Verizon

Today Verizon announced they’ll have the iPhone. This means more than 180 million subscribers in the U.S. will have access to the iPhone. It’s likely that Sprint, T-Mobile and other carriers will also eventually get the iPhone.

Wider iPhone availability will accelerate the already blazing growth of smartphones and mobile commerce. Look for gloves-off competition between smartphone platforms.

Google’s Android platform now faces pressure from Apple and Microsoft. Windows Phone 7 has received generally good reviews from users so far and is a viable alternative to Android and iPhone. Look for manufacturers and carriers to offer it.

With the iPhone on Verizon, Android no longer has a protected position as the iPhone for Verizon customers. Now those customers can have the iPhone as the iPhone.

Consumers will benefit from the resulting innovation.

Mobile payments – and contactless NFC (near field communication) in particular – is shaping up as the battleground for 2011.

Yes, mobile payments have been “just a year away” for each of the last 10 years. But this time it looks different. Really.

Google launched the Nexus S in December 2010 with NFC payment hardware and software included. Apple NFC patents were filed last year and Apple has hired a NFC expert (Benjamin Vigier, who I have worked with in the past at mFoundry).

Apple is expected to announce NFC capabilities as a part of the iPhone 5 later this year. If so, this can be the catalyst to finally jumpstart the mobile payment marketplace in a way the dueling banks and carriers haven’t been able to do. Apple controls both the iOS hardware and software on the leading global smartphone and tablet devices. Apple also has over 160 million credit cards on file in the iTunes App store.

In fact, Apple has had mobile payments live since the introduction of the App store. iPhone users simply click Buy in the App store, enter their password, and voila! the purchase is theirs. The 0nly additional step is allowing the phone to interact with merchant point of sale (POS) equipment.

In doing this, Apple is positioned to take a slice of every mobile payment from their platform, giving Apple a revenue stream similar to Visa or Mastercard in addition to their existing revenue streams. To explain, when you make a purchase with a credit card, roughly 1-3% of the purchase goes to various payment companies and financial institutions that enable the process. Apple stands to get a cut of the trillons (with a T) of dollars flowing through this system.

Of course, Apple won’t get it all. Microsoft had a near lock on computer operating systems, but didn’t capture 100% of the market. The payments market is too big for everyone to just write a check to Apple. Look for intense competition and significantly increased payment options. Google, Nokia, AT&T, Verizon, Banks, Visa, Mastercard, American Express, they’ll all suddenly show up with options.

Of course, this means more convenience and lower costs to consumers… when it happens.

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