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.
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.
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.