Apple's iWatch meets payments: Disney's MagicBand concept at scale

Apple's iWatch meets payments: Disney's MagicBand concept at scale

Summary: Should Apple's iWatch double as a payment system it could make checkouts at brick-and-mortar retailers easier. The wearable payment concept has already been proven to work by Disney's MagicBand.

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Apple will reportedly include near-field communication in its upcoming smartwatch, or iWatch, in a move that would take a concept from Disney and scale it to the masses.

According to the Wall Street Journal, the iWatch would have NFC technology, which enables data transfer and mobile payments on smartphones. NFC isn't new — Android has featured NFC for a while — but hasn't been popular as a mobile payment system.

magicband
Should Apple's iWatch double as a e-wallet it has the same potential as Disney's MagicBand when it comes to frictionless commerce. Credit: Disney

This iWatch, or wearable, could be revealed at Apple's Sept. 9 iPhone 6 unveiling next week.

Apple, while late to the NFC and mobile wallet game, has all the tools to become a commerce enabler via a wearable. A mobile payment scheme that revolves around the smartphone has too much commerce friction. Why? You still have to take out your phone. In other words, it's still easier to just use your card to pay at checkout.

An iWatch that serves as a wallet could change that equation. Commerce friction, notably at the brick-and-mortar part of retail Apple is targeting, would decline if all you needed to do was swipe your iWatch at checkout. The iWatch wallet would presumably be connected to your iTunes account and the credit cards already stored.

If you've been to Disney in recent years, you know this iWatch-as-wallet concept is powerful. Disney has been using its so-called MagicBands as room keys and payment tools. The friction involved with purchasing a meal, getting into your room and buying anything on the resort has declined. And guess what? It's a safe bet that the MagicBand drives revenue velocity for Disney.

More: Apple to stream iPhone 6 event: Here's how to watch live | iPhone 6: Can Apple make pay-by-smartphone work this time? | Apple's screen size barrage with iPhone 6, iPad caters to enterprise | Can Apple's iPhone 6 make NFC user friendly? CNET: Rounding up every rumor surrounding Apple's supposed smartwatch | Live blog on Sept. 9

On Disney's most recent earnings conference call, executives talked about MagicBands and the connection to Disney's MyMagic+ service at its theme parks.

Lowell Singer, investor relations chief at Disney, said August 5:

At Walt Disney World, this was the first full quarter in which MyMagic+ was available to all guests. About half of the guests now use MagicBands and 90 percent of them rate the experience as excellent to very good. We are very pleased with the growing popularity of MyMagic+ and expect it to contribute to the parks' earnings growth starting in the fourth quarter.

MagicBands will be one of Disney theme park's cash cows and ultimately become the front end of the unit's customer relationship management system. 

Given that the Disney and Apple boards are so intertwined from the Steve Jobs days, the MagicBand applied to iWatch connection almost seems obvious in retrospect. Indeed, Creative Strategies Tim Bajarin speculated in June that Apple's iWatch best approach could be to mimic the MagicBand.

Apple's iWatch payment scheme should work well. First, credit card companies will be interested because Apple could juice transaction volume. Second, retailers may update their point-of-sale infrastructure to enable easier checkouts.

It's unclear whether a mobile payment system is enough to entice the masses to buy an iWatch from Apple. But rest assured an NFC-enabled iWatch is how Apple will make its money on the back end.

Topics: Mobility, Apple, CXO, E-Commerce, iPhone, Innovation

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29 comments
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  • Hate Magic Bands

    I love people who tout magic bands yet have never used them.

    We go to Disney yearly and average trip is around 10k. While the bands are nice for some things, our overall impression:

    - uncomfortable to wear
    - Often stop working and need Disney staff to re-sync
    - Quicker for some payments options it falls down when acting as your "ticket"
    - For those that wear a watch or bracelets you either double up or wear on your alternate wrist and look like some weird hercules / wonder woman spin off.

    It was comical the looks when you told Disney management who much you hated them. Speaking to normal workers they all agree they are not great. Personally it's something that may cause us to spend out vacation elsewhere. Its not just us - read any of the Disney forums and plenty of people don't like the bands or the new systems.

    If that is Apple's big play with iWatch it will be interesting to see how big a market is out there. Personally I have a nice Omega and Breitling watches that won't be replaced for any smart watch. I already have a smartphone.
    MobileAdmin
    • I just read the headline recently that stated

      "Did Apple just make the Credit Card obsolete?".

      I never knew NFC ever existed before this.

      Interestingly enough, Steve Jobs was Disney's largest single shareholder (tough now his widow is) so I'm curious now as to whether Disney was actually testing Apple's NFC technology all along. I'm sure Jobs would have say in something like that sitting in the board meetings.

      If o, it doesn't bode well for the iWatch or iPhone if this is the case.
      William.Farrel
    • I agree

      MagicBands are terrible and bottom line is wearables will be a FAD that will fade out over the next 3 years.

      By the way, they will still give you a room key if you are insistent enough.
      cmwade1977
    • Love Magic Bands

      Anything that eliminates me getting my credit card out to pay is a good thing. ID theft and CC theft are major issues. For my family, I love the security of the magic band for payments and the new fastpass system make it even more usable.
      irondukie
      • so a device linked to your cc

        is safe? one that can be ripped off your wrist? if you are that fearful of taking your wallet out in front of a cashier, you should just stay at home.
        jasona93
        • device is NOT linked to your cc

          Jasona93, You're comment just goes to show that you have no idea how the MagicBand system works. The band is only linked to your reservation, not directly to your CC. When a guest choses to activate the touch to pay system, they are required to create a pin number. That pin is unique to only ONE band. If a purchase is made using the band, the credit card is not charged, the charge is applied to the guest's reservation folio and then itemized at the end of the trip and printed for guest review before the front desk runs the card on file or another card of the guest's choosing.

          Since no personal or otherwise identifiable information is stored on the band, stealing one will do you no good. There are numerous safe guards built in. For example, if you scan your band at 5 incorrect rooms, the band is automatically disabled.

          Maybe do your research before you comment next time. :-)
          noremac430
          • Not linked to your Credit Card

            Naromac430, you are correct on your comments. But one important point is that only people that reserve at a Disney hotels can benefit of the Magic Band. If you purchase the band at the park you cannot use it to purchase a meal or merchandise. Only to use it as a ticket to come into the park and make reservation for fast past, nothing else. If you are staying on a non-Disney hotel you are out of luck. If you are staying at a Disney Hotel you get the bands when you make a reservation 30 days in advance. Obviously after your purchase the band you can use as many time you want up to 2 years when the battery dies thru your Disney hotels reservation.

            On the other hand the iWatch is not going to be linked to a hotel, if they use the NFC feature but to your credit card. All merchants will have to have a touch to pay device install in each POS to work. You cannot slide the watch thru the credit card device. This is another expense to the merchant which mean higher prices to pay for the services or product. You all know that banks charge the merchant a 5% for every transaction on credit. It can be hacked like what it happen to Target. It will give criminals another incentives steal you watch or cut your arm.

            BTW, the Magic Bands at Disney not always work. Many of the touch to pay cause the POS to crash. Sometimes it does not work at the entrance. Disney has been working on this for a few years. After mounting cost it was decide to bring it to the resort and park to capture the benefits of it.
            jazzy2945
        • google wallet

          My guess (note the 'guess' word) is that it will require you to put your finger as you put the wrist near the machine, more or less what you do with most Samsung products that use nfc already (instead of typing a password, if you set it for fingerprint validation). Basically, since fingerprints are not a secure measure (they may be to prevent your girlfriend to see photos in your phone, but not for money stuff) if they steal your watch, they steal the money you have set apart (if my fingerprint guess is correct).
          voodoochicken
    • Love Magic Bands

      I travel around the world quite a bit. Disney is the only place where I can travel through their entire “city” without ever reaching for my wallet. I also don’t have to worry about bringing my phone to the pool or worry if is charged and their “app” is loaded when I do carry it. I can go from sipping drinks at the pool directly to a theme park, get fast access to the rides, then when I am hungry, they deliver the food I ordered last night while chilling out watching a movie directly to me simply because I sat down a table – any table – in the restaurant. And by the way, with my “FastPass” to the restaurant, I walked passed a 100ft line of people waiting to get to place order. Who else does that? What’s not to love about the MagicBand?
      ScubaNow
  • OMG

    The pure evil of Apple meets the pure evil of Disney.

    Darth Vader's march is now playing...
    siskol
  • Larry, you're going over the top

    Your obsession with Apple vapor ware is getting a little ridiculous. I'm still having trouble seeing the need for wearables. As for the incredible difficulty of taking my phone out of my pocket, I would take the starbucks app over pulling a card out of my wallet any day of the week. There is so much that could be done with NFC, but there are security concerns which trump (in my view) the extreme difficulty of removing my phone from my pocket.
    larsonjs
    • Vaporware?

      It's gonna feel good to come back to this article a year from now when Apple is dominating in mobile payments and see how wrong you are.
      Maha888
  • Not a good comparison

    The Disney thing is a closed environment with limited time use and not a general payment service. It would be like saying sales of mickey ear hats proves that would make a good hat that people would use everywhere.
    Buster Friendly
  • Yes!

    Very good observation, Disney or not. Some here have commented that Disney was maybe testing Apple's NFC solution all along. That's not how product development works, folks. There has been some serious deal-brokering and engineering behind the scenes. Having said that, Disney's implementation possibly served as a nice *real world* example to follow.

    I'm still skeptical about NFC in particular, though. With the all the store apps available, as well as iBeacons and the multi-peer networking API, it looks like there would be alternative payment solutions in certain stores: Target, Walmart, Macey's, Starbucks (basically your big chains) and then any Ma&Pa stores willing to use an iPad as a point of sale device. iBeacons seems like a much more expedient way to make mobile payments happen....... For stores not adopting Apple's point of sale tech and/or apps, NFC would be just about the only alternative.
    candrsn2112
    • iBeacon 101

      1. iBeacon is a specification and is fully supported by other non-iOS devices and many vendors create compatible beacons. So, you Android device will be just as capable as your iPhone to participate

      2. iBeacon is a proximity technology which would be in appropriate for payments. You are lucky if you can reliably determine what table in the store you are closest to (yes I have developed for these) let alone that it is somehow supposed to know you are trying to pay for something.

      Near Field is a much more sensible way to handle payments as it requires a pretty deliberate action in order to initiate an activity and is fully supported by all major smartphone OSes (in many ways more so than Apple).
      Too_Busy_To_Be_Here
  • Commerce Enabler?

    Do we really need a different way of paying for things than what we've already got? Perhaps NFC hasn't taken off because there's no compelling reason to use NFC? Is electronic payment something the market is demanding? Or is it a solution to a problem no one is faced with?
    ye
  • Security is #1 for me

    I don't think I'd feel all that safe using iOS to do anything that would require security after the continued security issues they've had this year alone.
    dlambert@...
  • Apple likes when you are complacent

    Just whats needed storing more personal info in your iPhone, but now it's financial data.
    Apples in your face attitude towards supplying you more ways to spend money with all the jeopardy on your shoulders.
    striptaway
  • Advancement is good

    My family regularly goes to Disney and has loved the convenience of the Magic Bands. When the FAST Pas integration happened recently it only got better. Not an apple fan per se but if they make the move toward secure wearable interaction points easier I would be intrigued to see the result.
    BucsFan
  • Awesome Experience..!!

    We used MagicBands on one of our recent trips and it was a really nice experience.. It was hassle free, quick and quite magical. Young ones in my family really liked the colors and we were happy with the overall experience..!!
    Megha_Agrawal