Apple's Passbook Already Has Your Credit Card, and the Rest of the Wallet Will Follow

By Nathaniel Mott , written on June 12, 2012

From The News Desk

Forget Google Wallet. Forget PayPal's ridiculous triangle dongle and Sprint's rumored solution. The tech press loves to write about digital wallets, declaring that each new product will be the one that finds the modern-day El Dorado by cracking the digital wallet formula.

Until 1:00 PM EST yesterday, if I had been pressed to choose just one product that might (might) achieve wallet dominance I would have chosen Square. The company's attention to detail and design-driven approach have netted over 1 million users and the processing of $5 billion in annual transactions.

Apple's new Passbook, an app that retains credit card information as well as rewards cards and movie tickets, has since convinced me otherwise. The tight tethering between the iPhone's hardware and software may make Apple the only company with the luxury of time to build a payment platform. Most iPhone users have handed their credit card information to Apple to make purchases through at least one of the company's online stores, providing a wealth of data – 400 million credit cards and counting – that Apple can use whenever it feels that the timing is right.

But the genius of Passbook is that it isn't stopping there. It is looking so far beyond the credit card that it's launching without any form of payments system in place, forgoing the credit card (for now) to grab control of the rest of the wallet.

The lack of a dedicated payments solution caused Brian Riley, a senior research director in the retail banking and cards practice at CEB TowerGroup to tell American Banker that Passbook is "A mobile wallet lite." Glenbrook's Scott Loftesness writes, "[...]Passbook today is really just a toolkit for application developers. It is not a revolutionary new mobile payment system from Apple that the industry has been speculating about."

Both Riley and Loftesness are focusing on Passbook as a payment platform – despite the fact that Apple never mentioned Passbook becoming a "payment platform" in the way that they describe – and have judged that the software isn't ready to become "the" digital wallet. For now, Passbook isn't going to pose a threat to credit cards.

And you know what? That's okay. My credit card is nothing compared to the rest of my wallet. Reward cards that promise cash back if I'm willing to give out my email address and participate in an online survey, movie tickets, membership cards, and my driver's license all call my wallet home. Any service that would finally convince me that it's okay to purposefully (key word) leave my wallet behind would have to provide access to each of those bits of paper and plastic.

While it's just speculation at this point, I can see Apple's Passbook replacing a physical wallet. By allowing developers to connect to a number of APIs and baking support for a variety of cards and services directly into the application, Apple can capitalize developers' love of the platform to quickly expand to serve, well, the entire iPhone market. Ignoring the credit card may be the key to replacing the wallet.