Apple

How Apple IPhones Could Change Commerce


The new iPhone 5S, with fingerprint technology

Photograph by Justin Sullivan/Getty Images

The new iPhone 5S, with fingerprint technology

Apple’s (AAPL) iPhone launch event on Tuesday was largely devoid of surprises, but the company’s new phones have several features that could significantly affect the way people shop online and in the physical world. Just not quite yet.

The most widely noted feature of the new phone was its fingerprint scanner. For now, the utility of the scanner is limited. It can be used only to allow users to bypass the need for a password when they want to unlock their phones or buy things from iTunes. This is kind of neat, and it could prove to be a modest benefit for Apple in the corporate market, in which users often have to enter long passwords to unlock their phones. At the moment, its most important distinction is that Samsung (005930:KS) phones don’t have this feature (yet).

Apple is probably going to move slowly in putting forth more ambitious uses for the scanner. It’s hard to think of a more awkward time to give a technology company such sensitive information, given the rolling revelations about the extent of National Security Agency spying. Sure enough, the Internet lit up with discussion of the security of fingerprint scanners in the hours following Apple’s announcement. Apple made a point of saying that users’ fingerprints will be stored in a secure space within the phones themselves—and never uploaded onto the company’s servers. “Expect this storage area and the connections to it to become the subject of frenzied investigations by hackers of all persuasions,” wrote Sophos, the security company, on its blog Wednesday morning.

But companies writing e-commerce apps are probably hoping Apple will loosen up soon. Perhaps the scanner’s biggest potential use would be to reduce the friction on sensitive online transactions by letting developers build apps that allow for fingerprint scanning for their own in-app purchases. Doing so could drive more people to shop on their phones. This could be done while keeping the actual fingerprint data on the phone itself, says Benedict Evans, an industry analyst. But Apple is not yet allowing developers to build the capability into their own apps.

Apple has also quietly added a feature to iOS 7 that could be used in physical retail stores. Called iBeacon, it allows a phone to communicate automatically with sensors nearby. This could be used to tell a store, for instance, that someone has entered, enabling coupons or mobile payments. Apple also allows users to share photos or documents through a feature called AirDrop.

So far, grand ideas about mobile payments and coupons have not been backed up by consumer adoption, so there’s reason to be skeptical about the potential for some new features from one phone maker to change things. But Apple’s new phone does seem to be banging another nail into the coffin of near-field communications, a technology that allows phones to exchange information when brought into close proximity. NFC, which has been integrated into many Android phone and stores’ point-of-sale machines, was once heralded as the way to drive mobile payments and other commerce-based functions. NFC backers often cited the inevitability of an iPhone with NFC as a tipping point for the technology’s adoption. But increasingly it seems like Apple may never do so, despite a trickle of patents hinting otherwise.

“Apple has effectively killed NFC by refusing to support it,” said Evans.

Brustein is a writer for Businessweek.com in New York.

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Companies Mentioned

  • AAPL
    (Apple Inc)
    • $95.22 USD
    • 0.18
    • 0.19%
  • 005930:KS
    (Samsung Electronics Co Ltd)
    • $1284000.0 KRW
    • -22000.00
    • -1.71%
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