Passbook and Payments: Today and Tomorrow

October 19, 2012

When Apple announced iOS 6, the single new feature which I thought was a snoozer was Passbook for iPhone and iPod touch — Apple did a horrible job selling it. But after spending roughly a month using Passbook, I’m pleased to say that my skepticism was misguided.

If you aren’t aware of what Passbook is, it’s an app which is effectively a repository for all of your (supported) store cards, coupons, tickets, etc. — let’s just call them “passes”. It potentially clears up your wallet and if you wear skinny jeans as I do, it’s a godsend to not have to squeeze a big fat wallet into a relatively thin pocket.

Picture of Passbook on an iPhone

One of the really cool things about Passbook is that each pass knows your location via GPS on iPhones and WiFi on iPod touches, and when you reach a location where one of your passes is usable, a notification for the specific pass appears on your devices lock screen and allows you to immediately pull up the pass.

Picture of Passbook on an iPhone's lock screen

The way Passbook works is that each pass has a bar or QR code which can be scanned by scanners. For example, Starbucks’s digital cards work with Passbook, and each Starbucks location has a scanner which scans the digital bar code on a customer’s device. The scanner is super fast, too; it takes less than a second to scan the bar code on digital Starbucks cards! When you run out of credit on the Starbucks digicard, you just refill it in a web browser or the app.

Picture of Starbucks card in Passbook

So, that’s Passbook today. Now, what does the future look like?

I haven’t paid for a Starbucks drink with my debit/credit card in about a month, and I know that I’m not alone; I’ve spoken with two Starbucks baristas at two different locations, and both have said that more than half of all customers use digital cards on their device to pay for their drinks. Most of the rest use physical Starbucks cards, and very few use their debit/credit card or cash — that’s insane!

Obviously not all of those device transactions are in Passbook on iPhones and iPod touches — Starbucks has an app for Android devices which isn’t as cool as iOS’s Passbook — but cumulatively it’s indicative of where the future is headed. Our wallets and our physical debit/credit cards are becoming redundant as we can make payments by scanning bar codes on our phones.

My prediction is that within ten years debit/credit cards will be outright useless to anyone with an iPhone. When you look at all the services that currently exist, the writing is on the wall for physical debit/credit cards. Banks will still be around to hold money, but the cards that they issue today will be replaced by PayPal and similar services.

PayPal today is an easy way to pay for stuff online; payments are made with a simple login instead of typing up every little detail about one’s debit/credit card. You don’t have to look further than online payments with PayPal to see that “plastic” is ridiculously antiquated and clumsy. History has shown us that antiquated and clumsy stuff is replaced in time; technology tends to push the human race forward and most people aren’t masochistic enough to stick with the past.

But the problem with PayPal right now is that it’s for online payments; you can’t walk into a Starbucks and pay for a drink with your PayPal account, as an example. I don’t see PayPal restricting itself to eBay forever. Whether it comes in the form of a bar code or something else, PayPal or a similar service will enter the in-store purchases field.

If there are any geeks reading this article, there’s a chance that they’re dismissing what I’m saying because of a little technology called “Near Field Communication” (NFC). For the uninitiated, NFC is tech that allows devices to talk to each other; think of it like Bluetooth that doesn’t require pairing but has slower transfer speeds.

The current popular idea of what NFC should be used for is mobile payments, with debit/credit cards digitized on phones. If you have a select Android phone and you happen to wander into one of the two stores that support NFC payments, you’re golden and you can pay with your debit/credit card on your phone. This is the idea that Google has thrown its weight behind, and I think that it’s very backwards-thinking.

Sure, the idea to kill the physical wallet is the right idea. But debit/credit cards need to disappear, and trying to give them new life through NFC only stalls progress. The best way to A) convince PayPal that it needs to get on in-person payments and B) convince stores to support whatever PayPal does, is to show that we’re done with debit/credit cards. I’m tired of having to tell the Domino’s guy my debit card’s 16 digit code, expiry date, then the 3 digit code, whenever I order a pizza.

It’s just madness.

This is completely hypothetical, I’m not making any predictions here, but consider this: Wouldn’t it be powerful if — at the iOS 7 or iOS 8 announcement — Apple comes out and says that it’s been working with PayPal and merchants to allow in-person PayPal payments with Passbook using Bluetooth or bar code? That would be huge, and that would end the big fat wallet and credit/debit cards as we know them.

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