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Imagining a Passbook-powered digital wallet

Marco Tabini | May 6, 2013
iOS 6's Passbook has had a slow start, but if Apple were to turn it into a real, two-way digital wallet that connects customers and retailers, it could be the beginning of something revolutionary.

One of the biggest sources of credit fraud is the point of sale--where crooks often skim credit cards and steal PINs, and where you have no choice but to hand them over to the merchant. A digital wallet, on the other hand, can create single-use credentials for every transaction, seamlessly enabling the merchant to charge you without ever coming into contact with your personal information.

Keeping tabs on your money

Though credit cards are complicated and confusing beasts, when properly used they offer many advantages over cash--for example, rewards or special discounts under specific circumstances. Even the ability to postpone payment until the next bill is due can help customers manage their money and spread out their expenditures over time.

But juggling multiple credit cards can be a hassle. For example, a particular card may offer special rewards when used in a specific store, while another one may give you extended interest-free payment terms for purchases above a certain amount.

Unless you're an accountant (or like me, you're married to one), that's a lot of information to keep track of--not to speak of trying to figure out which option is best in a given situation. But a digital wallet could easily keep track of your cards' various special features  and pick the most advantageous one to use for a particular purchase, whether with the long-term goal of shaving money off your expenses over the course of a year, or accruing points toward a vacation or other reward.

Even better, a digital wallet system set up to allow merchants to send data back to the user could collect detailed information on all of your purchases and feed it to a personal finance package, which could help you track your expenditures and make better-informed decisions. (In my family, we do the same thing by hand--which is incredibly useful but also mind-numbingly boring.)

A matter of control

Could Apple pull off something like this? It's hard to say. If the company did undertake such an effort, it would probably encounter a number of obstacles along the way.

For one thing, credit card processors are unlikely to welcome the prospect of having a third party meddling in the purchase process that they currently control. I wouldn't be surprised to see them try to block Apple from offering an alternative to their services.

However, the folks from Cupertino could sidestep this problem by building a digital wallet that allows merchants to obtain credit card numbers from users securely, and then use those numbers to process purchases through normal channels.

Similarly, credit issuers and large retailers may be wary of the power that the data collected by a digital wallet gives their clients. Better-informed customers--particularly if helped by well-written software--are likely to make smarter financial decisions, giving consumers a chance to save money that would otherwise end up in the pockets of the banks that issue their credit cards, or the folks that sell products and services.


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