Why Apple Has Already Won the Mobile Payments War

Mobclix believes Apple has already won the mobile payments war with its iTunes payment and media distribution platform. The iPhone is soon to be a mobile payments platform.

It’s so easy, so convenient and so magical. No, I’m not referring to the latest device by Apple, but one of the underlying processes that changed the fundamental dynamics of making a purchase on mobile devices: Apple’s one-click payment system, or iCurrency. Yes, I know, there is no such thing called iCurrency. Call it whatever you like, the fact is – today, Apple has driven more than 10 billion downloads of digital content through iTunes (e.g., music, movies, TV shows and e-books, etc.). If Apple opens up their one-click system to mobile and online retailers and other businesses, they will surpass PayPal. Moreover, Apple will achieve what mobile carriers have been trying unsuccessfully to do for the last 15 years: process all consumer purchases through mobile devices. How? The three main drivers Apple has in its favor include (1) enablement of impulse buys, (2) trust from consumers and (3) proliferation across over 100 million iOS devices.

Digital content has evolved tremendously over the last 10 years – from ringtones and simple WAP games on the carrier decks, to robust applications, games, movies, songs, books, in-game currencies and much more. Considering the multitude of mobile devices we carry and our need for on-the-spot satisfaction as a society, our love for digital content and our ability to blindly follow, the magical one-touch button will only continue to grow exponentially.

My theory of iCurrency domination stems partly from my own personal experience and the fact that companies like Paypal have seen an increase in mobile transactions that are six times higher than in 2008. In fact, Paypal expects to close out 2010 with over $500 million in mobile transactions.

Embracing the Impulse

In the beginning, I made it a point to never purchase music or digital content (beyond Netflix) period. This changed in 2009. To date, I have amassed a bill of over $588 in apps, iTunes music and movie downloads. At first, my downloads were innocent enough: $0.99 iPhone apps, which turned into a song or two to help the commute move along. Soon, I was buying full albums of music that I already owned (just because it was easier than uploading the songs from my existing CD collection). Eventually, I started to rent movies from iTunes and then blindly bought apps without thinking twice. As I became more crazed for apps and music, it’s no surprise that I jumped on the iPad bandwagon as well. This opened up a whole new world where many of my favorite apps up sold me on their HD versions on the iPad. For example, I used Things by CulturedCode on a daily basis on my iPhone. Buying this $10 app led me to get the $50 Mac version and the $20 iPad version. All in all, I paid $80 to track my to-do list on multiple devices.

The impulse buy is clearly something that can lead to return purchases. It’s especially interesting that impulse purchases can train consumers to become comfortable with future purchases, without giving as much thought to price and/or necessity.

Consumer Trust

To help illustrate how Apple has captured consumer mindshare and trust in this marketplace, Mobclix conducted an impromptu survey on our mobile ad exchange network.  The sample size included 982 iPhone users through various games, health and fitness apps[1]. Of those surveyed, 756 users spent between $6 and $25 a month on apps, while 89 users spent over $26 a month on apps – which is the equivalent to buying one $0.99 app a day.

Chart showing average monthly expenditures by iTunes users. The chart shows how much iTunes users are spending in iTunes per month.What’s even more interesting is that close to 77 percent of all participants purchased content – that’s significantly higher than the 1 to 2 percent conversion rates on casual PC games.  This level of participation is not only indicative of a trustworthy platform, but also of coupling software and content with incredible devices which have yet to be surpassed.

Let’s Put the One-Touch Button Everywhere

Digital content is a big part of our daily lives. The way we purchase, use and consume content has drastically changed. Most consumers are already conditioned to use a one-touch payment button on Amazon and iTunes. It’s now only a matter of time before people can walk into the mall, pick out some clothes and accessories, and then hit a “purchase on your mobile phone” button.

That being said, before any ubiquitous one-touch payments model can proliferate, it needs to be trusted by consumers in order to dominate the market.  Today, Apple has that trust and is poised to jump in feet first – if it decides to open up its purchasing platform and allow other mobile commerce sites to integrate with it – to direct the market as mobile commerce begins to explode exponentially on all fronts.

About the author

Headshot of Sunil Verma, Mobclix co-founder. Mr. Verma gives IntoMobile his perspective on mobile payments and why Apple has already won the mobile payments war.This guest post was written by Sunil Verma. Mr. Verma is Mobclix co-founder and focuses on product development and operations, working to create the best possible product and feature set to help developers achieve their application goals. He was most recently a partner in Venus Capital’s Private Equity Group, where he focused on investments in digital media in the U.S. and India. Previously, Sunil has authored numerous articles on the private capital markets in India. Sunil is an active member of TiE (The Indus Entrepreneurs) and has chaired several panels at its annual conference. He previously served as an Executive Member for NextGen Partners, where he co-developed a series of educational and social events for junior investment professionals. Sunil graduated with honors from Santa Clara University with both an M.S. and B.S. in Computer Engineering.

About Mobclix

Mobclix (www.mobclix.com) is the industry’s largest targeted mobile ad exchange — the first open marketplace for mobile developers, advertisers, ad networks and agencies. The Mobclix ad exchange provides complete transparency and visibility for mobile publishers to manage their ad inventory and maximize revenue and for advertisers to increase campaign performance. Mobclix is a privately held company headquartered in Palo Alto, Calif. The company was founded in September 2008 and has since been named an AlwaysOn 250 winner and won the ad:tech Limelight award.

[1]This case study was based on the results of 982 completed surveys. Participants were not provided with incentives or compensation to complete the survey. All participants were over the age of 18 and were based in the United States and Canada when the survey was conducted.

  • Jim

    I’d say it is too early to call the winner of the mobile payments war and I dont think Apple have an opportunity or the ambition to be the winner.

    100 million iOS devices is a very small slice of the global market. This will be perceived as a major problem by most providers of digital goods who want to reach their entire market with their services.

    Apple are focused on ensuring that the user experience for their customers is as simple as possible. Where payments is part of this they will partner with market leaders and combine with their own features to ensure their customers have a great experience as well as choice of payment method. This will remain their focus.

    Payments specialists are making huge investments and are right in the middle of launching new products to satisfy the three customer needs you describe and much more. Competition is hot, and all will be keen to work together with itunes and other leading content providers and participants in the technology ecosystem. It should be fun to watch!

  • Srikanth

    Nice post, but IMHO you’re oversimplifying what it takes for a payment service to succeed.

    The big missing pieces in your argument are “ubiquity” and “interoperability”.

    At 28% in the US (and much, much less globally), iOS is by no means ubiquitous. And I’d be mighty surprised if Apple opened up its service, contrary to its traditional closed model.

    Agree with Jim, fantastic UX for buying stuff from a proprietary storefront, but its utility diminishes drastically outside this controlled environment.

  • http://www.p2pcash.com Tom

    Where did you get the $500M mobile payment figure for Paypal!
    I highly doubt it as they have very little traction outside of eBay and outside the US.

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