Patent or no patent, Apple's iWallet intentions still unknown

Recent developments from Apple Inc. signal advances in its digital wallet initiatives. On June 6, 2013, the U.S. Patent and Trademark Office released the contents of an Apple patent application for a "method and system for managing credits via a mobile device." This adds to a trove of such filings by Apple for its iWallet technology over the past three years.

In the latest filing, Apple seeks to patent a communications network that will, among other things, maintain and issue "credits, vouchers or coupons representative of monetary value to users of mobile devices" for the purchase of goods and services using wireless or near field communication (NFC) at POS terminals.

Industry analysts have described the technology as a combination virtual currency and digital wallet that enables people to store money in the cloud and make payments via iPhone. The network described does not require NFC for POS payments, but the fact that the application mentions NFC indicates Apple hasn't ruled out using it.

One of many mobile wallet options

Payments industry attorney Adam Atlas said that to be valid, a patent must be novel, and patents are open to challenge. "I would be surprised if there were no prior art on this topic prior to the date on which it was filed, which was Jan. 29, 2013," he said. "I guess we should remain curious to see how this plays into the currently active market for essentially paperless versions of your old-fashioned plastic wallet."

Whether this will be a major game changer is debatable. "There are so many ways to handle an electronic payment through a mobile device that I don't see that this as some kind of immense land grab for Apple," Atlas said. "I could be mistaken, but I don't think that anyone with or without a patent like this is going to get in the way of good, healthy and productive competition in the payments market."

Chris Gardner, co-founder of Paydiant Inc., a mobile wallet and reward platform, agreed. "One thing we've learned is that they are a patent machine, and their patents are not necessarily a leading indicator of anything that's actually going to see the light of day," he said. "We prefer to look at what they actually bring to market, like Passbook, and where they're virtualizing keychains for stored credentials in the cloud."

Passbook is a digital organizer for storing boarding passes, coupons, loyalty cards and other mobile payment apps. Apple recently added quick response code scanning to Passbook. It also upgraded the iCloud Keychain, which encrypts and auto-populates passwords on approved devices.

Apple as money transmitter

Whether or not Apple is awarded its latest iWallet patent, the question is what role will Apple play in mobile payments and the payments system in general? According to Atlas, if Apple were to actually become a money services business, it would be required to register with the Financial Crimes Enforcement Network and obtain money transmitter licenses in the states that require licensing.

"You could own the patent and license it to someone else to use the patent," Atlas said. "The fact of owning a patent on a payment process does not mean that you necessarily use it. But logically, if Apple wants to make money from this patent, we would expect them to register with FinCen and get licensed in all 50 states, or the 46 states that require licenses." He added that the process that generally takes from one to two years to complete.

Gardner noted that with iPads replacing cash registers at an increasingly high rate, Apple's play in the mobile wallet is more likely, at least in the short term, to be on the POS side, as well.

"To the extent they get into the wallet space, they're going to own the point of sale, they're going to own the hardware, and they'll probably own the communications protocol and invent the new one," Gardner said. "Once they get the hardware out there with the middleware protection at the point of sale, all of a sudden they're in a position to do something very interesting potentially on the mobile wallet side."

One can only speculate about what Apple will do next, but given the company's track record of innovation, it is unlikely the company will follow anyone else's lead in the digital wallet game.

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