October 17, 2012, 2:37 PM — Mobile payment has been hailed as the next great frontier for smartphones, and Apple has bet a chunk of the iPhone's future on its new Passbook app-a precursor to the mobile wallet.
At least this is the thinking from J Schwan, CEO and founder of Solstice Mobile, which helps large companies such as W.W. Grainger, Northern Trust and Discover Card execute on their mobile strategy.
"By introducing Passbook with its couponing, rewards and other capabilities through the iPhone, Apple is laying the groundwork so they can introduce commerce capability," Schwan says.
Currently, there are 14 vendors, including Starbucks, Walgreens, Target, United Airlines and Fandango, participating in Apple's Passport program.
Despite Apple's big Passbook push, there is still confusion over what it actually does. Here's a typical scenario of how Passbook works: Go to the Apple AppStore, tap on Apps for Passbook and download, say, the Starbucks app. Create an account, along with a credit card, and put cash into a virtual Starbucks card. The virtual card, or pass, has a barcode.
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At a Starbucks store, you'll be able to call up the card on your iPhone, either through the Starbucks app or Passbook app, and purchase a cup of coffee. Starbucks, like other Passport vendors, also offers customer loyalty rewards and freebies, such as a song available for download via iTunes, straight from the app.
CIO.com sat down with Schwan to get his take on the future of Passbook and the challenges ahead.
What does Passbook look like now, and what might it look like in the future with full-blown mobile payment?
Schwan: Passbook, Apple's foray into the mobile commerce space, opens up a lot of opportunities for making engagement with brands much more efficient and easier. We think it's going to drive up adoption considerably by ad users.
In today's scenario, I can use my Passbook to buy a cup of coffee at Starbucks. In order to do that, I have to go into the Starbucks app and register a gift card. I have to tie that gift card to some sort of credit card account that actually funds the gift card. Then the gift card, which displays a barcode, can be exposed through Passbook to buy a cup of coffee.
Tomorrow, Starbucks could say, "Instead of doing all that, we're going to present a barcode that's going to be funded out of your iTunes account." You won't have to do any of the setup.
So you'd have a barcode that links to your iTunes account, and you'd use it everywhere?
Schwan: Exactly. So now we're talking about Apple being a bank, and I don't think that's outside the realm of possibility.