iPhone Passbook: Six months on and it still disappoints

The Passbook feature in iOS 6 is one of the iPhone's most interesting and potentially disruptive software elements. So why has it generated so little excitement?
Written by Steve Ranger, Global News Director

Passbook marked a significant, and potentially disruptive, addition to iOS, but six months on from its launch, the iPhone's digital wallet is yet to generate any significant momentum.

The Passbook app for iPhone made its debut back in September with the launch of iOS 6. The central idea: that Passbook will store your loyalty cards and vouchers in a single digital wallet which can also work with other apps on the iPhone.

As well as reducing the clutter of plastic cards in your wallet, Passbook is also widely seen as Apple's first step towards turning the iPhone into a payments mechanism - a potentially enormously lucrative, though still nascent, market.

Passbook in the wild

Apple allows businesses to integrate Passbook with their own apps to take advantage of features such as location awareness - so, for example, your coffee shop loyalty card will pop up on the iPhone lockscreen whenever you pass your favourite branch. But how many companies are actually using Apple's digital wallet?

In the US app store, there are currently only around two dozen apps optimised for Passbook, including Starbucks, LivingSocial, Amtrak, Walgreens, Office Depot and Sephora To Go.

In the UK app store, that shrinks to a mere five - iHotel, United Airlines, Lufthansa, American Airlines and Starbucks.

However, new Passbook apps are being released: Dunkin' Donuts 'Dunkin' Pass' for example was added to the US store last month, allowing customers to pay for doughnuts and coffee with their iPhone.

And there are other gradual steps forward in terms of Passbook adoption: Major League Baseball trialled Passbook for electronic ticketing late last year and found that in a four team trial, out of the 1,500 e-ticket buyers, 12 percent chose to receive their tickets via Passbook. This year, 13 teams will allow customers to buy paperless tickets and redeem them through Passbook, according to reports.

Companies reluctant to integrate their apps fully can still use some Passbook features - for example, travellers checking in at the Virgin Atlantic website are given the option to send their boarding pass to Passbook. If they choose that option, they'll receive an email with a Passbook attachment.

A slow start

Despite the handful of Passbook-using companies, progress remains slower than might be expected for such a high-profile addition to the iPhone's software.

Ben Wood, chief of research at mobile industry analyst CCS Insight, told ZDNet: "I was extremely upbeat about the prospects of Passbook. From my perspective, it's a huge disappointment that it hasn't delivered against the expectation that Apple set. For Passbook to stand out you need hundreds of companies involved." (Apple declined to comment on Passbook for this article.)

Woods wonders if Passbook has had to take a backseat while some other elements of iOS 6, most notably maps, have been prioritised for development work. However, Apple needs to think about how to reignite consumer interest, he added, warning that if Passbook appears to be gathering dust "then there's no incentive for consumers to embrace it at all".

Starbucks Passbook app, one of a handful available. Image: Steve Ranger/ZDNet

"You've got to have a huge number of partners to make it worthwhile - 20 in their home market seems very small number indeed," he said.

While Apple may not have cracked it yet, there remains a huge potential market for Passbook, even if it only ever focuses on vouchers (Passbook can store companies' discount coupons, for example) and loyalty cards. These are vital weapons for retailers struggling to attract customers, and putting them on a phone and providing a richer experience is one way for retailers to get a better insight into customer behaviour, as well as building loyalty.

Despite Passbook's slow start, the market is growing: the number of discount coupons redeemed through mobile and tablet devices is expected to double this year to 10 billion as savvy shoppers hunt for discounts, according to Juniper Research.

And, while mobile still accounts for a comparatively low volume of coupons issued (compared to newspapers and magazines, for example), mobile coupons are much more likely to be used, with an average redemption rate of 10 percent, compared to traditional print media, with around one percent or less.

Juniper said Passbook is expected to act as a catalyst to both mobile coupon deployments and adoption — but retailers' reluctance to upgrade their sales terminals to allow vouchers to be redeemed is creating a bottleneck and slowing use of such coupons.

This lack of infrastructure is one of a number of issues holding back Passbook.

At the most trivial level, the iOS icon for Passbook looks like a pack of cards, suggesting gaming rather than digital wallet, meaning it's more likely to catch the eye of poker players than thrifty shoppers.

It's also clunky to use, especially for those new to the service. When it first launched, there was a handy list of Passport-ready apps displayed inside the app. That list disappeared after users started using Passport, leaving them adrift and unsure of which apps to choose. (Following a software update, this list is now a permanent fixture, however.)

The benefit to the consumer needs to be better defined too — removing plastic from a wallet isn't quite enough to make people jump through the hoops that Passbook demands.

On the business side, some organisations that have held back will be cautious about saying goodbye to that chunk of physical branding in your wallet.

Retailers like shoppers to carry loyalty cards as a permanent reminder of their offerings, and will be concerned about losing that direct connection to their customers to Apple. Integration is costly as well and, while the iPhone demographic is attractive, there are far more non-Apple using consumers out there.

Passbook's rivals

However, while Passbook may have made a slower start than some may have expected - and Apple may have hoped - it hasn't stopped other smartphone manufacturers building similar digital wallet applications.

Samsung has recently unveiled its own digital wallet and Microsoft's Windows Phone also has a wallet app. Various banks and credit card companies are in the mix too, wary of losing their lucrative position in the payments game.

All of that means retailers and others won't feel the need to automatically support Apple's app.

"If you're an airline, at minimum you have to do this for Apple and Android. Things have changed over the last year, Android has got a lot more momentum, and so it may not be the slam-dunk that Apple thought it was originally," said Woods.

But despite the slow start, Wood still sees potential in Passbook. "The philosophy around it is still fantastic, it is an excellent idea and given the number of people that have an iPhone and that the demographics of iPhone owners are up in that top quartile of spenders then its the right place to be sticking your loyalty card," he said.

Passbook may have got off to a slow start but it's going to be a marathon ahead, not a sprint.

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