What if iPhones were Apple Pay Terminals Too?

Apple Pay is being billed as a potentially industry changing initiative. 1 Nevertheless, in order for Apple Pay to become ubiquitous it must overcome challenges in two key areas. 2

Payment systems are based off of a two-sided relationship. On one side you have the person sending the payment and on the other side you have the person receiving the payment. So, the first challenge is to convince people to keep an item with them capable of sending the payment and the second challenge is convincing people to get an item capable of receiving the payment.

The first challenge is the easy one for Apple to overcome. People buy iPhones like hotcakes. Apple sold 10 million iPhone 6/6+ handsets during the opening weekend alone. Apple doesn’t have to convince you to carry a new Apple Pay dongle because it’s built into a device you already carry. The real challenge comes in having devices capable of receiving the payments in key locations. I separate those that receive payments into three main groups: virtual stores, large physical stores, and small physical stores.

Apple Pay attacks virtual stores indirectly by integrating with apps. I suspect that this will be sufficient in the beginning but look for Apple to eventually integrate Apple Pay directly into Safari to make using Apple Pay on the web a great experience.

Apple Pay must reach widespread adoption with large physical stores.3 I suspect this will not be too difficult for them to accomplish. Apple Pay works with industry standard contactless payment systems already seeing adoption across the world. One of Apple’s institutional strengths is negotiating contracts with large and powerful industries. Apple already has big retailers like Nike, Staples, Bloomingdales, and many more on board with the plan.4 And, oh by the way, in addition to getting major retailers on board Apple has partnered with major financial institutions.

I’m not trying to let Apple off the hook, but it looks to me like they will have reasonable, if not great, success with virtual stores and shopping at major retail chain type stores. However, Apple will not be able to make Apple Pay ubiquitous until they can infiltrate small physical stores. And to be clear, I am including individual people in this group. Many people have tried to revolutionize mobile payments that are made to small stores or individuals. Square immediately comes to mind. My wife uses Square to manage payments for her business. Overall the system works well and is user friendly, but it still has flaws. In order to swipe a card to have to have your dongle. And, guess what… people hate dongles!!! You could type the card number in, but as the person paying you run into the same security risks that confront the entire credit card industry.

What if Apple made an easy way to pay your friends back for lunch? What if Apple made an easy way to pay at smaller stores? What if the system was as easy as cash?

As I mentioned above, the challenge answering these questions exists because not everyone has an Apple Pay terminal with them all the time. But what if we did? What if the iPhone had the ability to send and receive Apple Pay payments? That would mean Apple did not just sell 10 million devices capable of sending a payment but 10 million devices capable of receiving a payment. That would be a stealthy way to make Apple Pay ubiquitous.

I do not know if the NFC implementation on the iPhone would even allow for it to send and receive payments. If it can’t receive payments right now then Apple is missing out on a huge opportunity to become the largest player mobile payments. If the iPhone can receive payments then the mobile payments market is Apple’s for the taking.

  1. I say “potentially” because, as with most things Apple, pundits can be very polarized about what Apple is doing.

  2. Although I will approach this from the viewpoint of Apple, the concepts I identify apply to all industry players.

  3. I use the term “large” loosely here. We could substitute in “chain” or “corporate” physical stores.

  4. I love you Publix but I am still pretty annoyed you have so far chosen to opt out of Apple Pay.

What is the Apple Watch’s secret?

Apple.com: Apple Watch Features

Now your inner circle is always nearby. Press the button next to the Digital Crown to access Friends, a place where you’ll see thumbnails of those you like to stay in touch with most. Tap one to send a message, make a call, or reach out in one of the new ways only Apple Watch makes possible.

The description reads, “Press the button next to the Digital Crown.” Apple must have a name for this button that is better than just a description of the button’s location. I wonder if the name of the button gives away something about the functionality of the watch that Apple is still keeping secret.

Untethering Apple Watch

Over the years Apple has cultivated a very powerful Halo Effect. The the Halo Effect works because you can get customers to experience one of your products, they enjoy your product, and they want to buy more of your products. Apple’s most famous halo products were the iPod and the iPhone. Unfortunately, I don’t think the Apple Watch1 has the same ability to be a halo product (yet). 2 And here’s why.

In order for a product to be a halo product you have to be able to buy it first. Famously, Steve Jobs was convinced to put iTunes on the Mac and PC. This made the iPod available to basically anyone. The iPod exploded because everyone could access a computer that worked with an iPod.

The iPhone is a halo product for Apple because it could be your first Apple product. Interestingly, over time it became apparent that something was holding the iPhone back. Something was preventing it from being an even better first Apple experience: tethering. You had to tether the iPhone to backup your device, sync, get software updates, or do any number of other activities. By construction this prevents anyone that does not own a computer from owning an iPhone. Apple recognized this and adapted. iCloud, for all of its problems, makes the iPhone the perfect halo product.3

The Apple Watch cannot be a halo product. The way it works is by being paired with an Apple device, so the watch becomes an accessory only. This will make rapid widespread adoption difficult. Understanding that the market of current iPhone owners is huge, Apple is limiting their market to their existing users.

I suspect the need to tether an Apple Watch will be temporary. As technology advances and becomes smaller and less power hungry, I hope to see Apple modify the Apple Watch through time so it can become a stand-alone device and the next great Apple halo product.4

  1. or Watch if you please

  2. To be clear, I am not saying the Apple Watch will be a failure. I think it will likely be very successful.

  3. I am not forgetting the iPad, but it follows the same conceptual arc as the iPhone.

  4. For more thoughts about the Apple Watch as a stand-alone device go here and here.

Scaling the new anti-inversion rules

bloomberg.com: Treasury Unveils Anti-Inversion Rules Against Tax Deals

The U.S. Treasury Department announced steps that will make it harder for U.S. companies to move their addresses outside the country to reduce their taxes, clamping down on the practice known as inversions.

I’m sure there will be a lot of virtual ink spilled over this story, but I can’t help but focus on this line from near the end of the article.

The congressional Joint Committee on Taxation has estimated that legislation to curb inversions would raise about $20 billion over the next decade.

According to our friends over at Wolfram|Alpha in 2013 the GDP of the US was $17.08 trillion and government expenditures were $3.746 trillion. So, the government spends about $118,785 per second… Raising $20 billion won’t even cover 2 days of government expenditures. In reality the impact is much smaller than that because the $20 billion will be raised over the next decade.

Educating a CEO

I read a very interesting article about CloudFlare’s new keyless SSL security system and this caught my eye.

Arstechnica.com: In-depth: How CloudFlare promises SSL security—without the key

The development of Keyless SSL began about two years ago, on the heels of a series of massive denial of service attacks against major financial institutions alleged to have been launched from Iran. “We got a series of fairly frantic calls from those banks saying they needed help with this problem,” Prince said. “We met with JP Morgan Chase, Goldman Sachs… pretty much everyone in that community. They described to us a challenge that put them between a rock and a hard place. They had spent billions on hardware in data center to control access to their network. But it didn’t matter—no matter how intelligent the boxes they bought were, they were falling over because the attacks were so large. There was no way spending more money on premium equipment could solve it.”

At the same time, the banks weren’t able to use existing content delivery networks and other cloud technology to protect themselves either because of the regulatory environment. “They said, ‘We can’t trust our SSL keys with a third party, because if they lose one of those keys, it’s an event we have to report to the Federal Reserve,’” Prince said. “Somebody has to explain to (JP Morgan Chase CEO) Jamie Dimon what an SSL key is, and then he has to call the Fed. It’s a [chief information security officer]’s worst nightmare.”

Organizations like banks depend so heavily on technology. How long will it be before the average CEO at the average company starts to have an in-depth knowledge of how common technologies like SSL work? I imagine we eventually will see a trend in non-technology firms where the path to become a CEO travels not just through CFO and COO, but through CIO and CTO as well.

Becoming Coca-Cola

I have watched every Apple product announcement and keynote address since 2006. Most of the time I am watching simply as a technology enthusiast waiting to see what’s next; however, overtime you get used to the normal rhythm of these events. Something was different about the event announcing the Watch and new iPhones. To understand how it was different let’s look at the anatomy of a new product launches.

The Pattern
1. Identify a market that is currently poorly served
2. Explain why current offerings are not good enough
3. Announce the new product
4. Explain why the product needs to exist 1
5. Compare and contrast the new product with existing poor offerings

Steve Jobs directly addressed Apple’s competitors and he made a case for Apple’s entry into a new market. Jobs announced Apple’s music player with slides like these:


Again, Jobs directly addressed Apple’s competitors and he made a case for Apple’s entry into a new market. Here Jobs even goes as far as mentioning specific models of competing smartphones.


The iPad was no different.

Tim Cook took a very different approach with the Watch. Throughout the announcement there would be no slide acknowledging the terrible state of the smart watch market, no matrix of the current inferior offerings, and no slide demonstrating just how terrible their competitors’ interface is.2 Apple did mention traditional watch makers. But, the tone showed much more respect for the mechanical wonders fine watches can be.

The evolution in Apple’s product launches shows they recognize that they are no longer an underdog. Apple is the big dog. Just as Coca-Cola never mentions Pepsi, Apple did not mention Samsung. Pepsi screams “we are better than Coke!” Samsung screams “we are better than Apple!” This may be an effective strategy for the number two vendor to follow but it can not be consistently deployed by the market leader.

I imagine, just as the Mac vs. PC commercials had to go away, so too will most direct mentions of their other competitors.

  1. The Watch announcement was surprisingly missing a solid answer here. I can think of a few reasons why it might need to exist but that should really be Apple’s job.

  2. I secretly wished they would put a slide up with one of these.

Waiting in a line

In the past I have been part of the crazies that line up on opening day to get the new iPhone. I did it for the iPhone 4. I did it for the iPhone 5. And, I even did it for the iPad 2. But this time it was going to be different. I decided that I would just get online and order one there hoping I would be able to get the phone delivered on day one.

There are a couple of things that I really enjoy about waiting in line for a new Apple product. There is an incredible amount of energy in the air as people anticipate their new purchase. I mean, you get to hang out with a few hundred other technology nerds. How could this ever be a bad thing? I have had great luck becoming friends, although temporary, with my neighbors in line. We have shared stories about how we use our iPhones, talk about the new features that excite us, and just shoot the breeze about other random things.

For me, buying an iPhone after waiting inline has been as important a part of the iPhone experience as using many of the iPhone’s actual features. When I decided to buy my new online I was a little sad that I would be missing this experience.

As it turns out there is a pretty good substitute for standing in a line for hours in the early morning: Twitter. The iPhone launched online at 3:00 AM Eastern time, but Twitter was flowing freely with people sharing their experiences trying to buy the iPhone. And just like in a normal line there was a lot of angst. Most launch day cell phone carriers and Apple could not handle the massive volume of people trying to buy an iPhone. And just like in a real line where you have no idea how many units the store will actually have, we waited anxiously to actually see the screen refresh allowing us to buy a phone.

So in Jimmy Fallon style, thank you Twitterverse for being just as crazy as I am when trying to order a phone at 3 in the morning.

The iPhone 6 and one-handed mode

Daring Fireball: Laugh It Up, Fuzzball

Brian X. Chen:

To deal with concerns that a bigger phone will make typing with one hand difficult (the current iPhone has a four-inch screen), some changes to the design of the iPhones’ user interface will allow people to type or use apps with just one hand; there will be a one-handed mode that can be switched on and off, two employees said.

I know what you’re thinking. You’re thinking, Oh, that can’t be. Samsung tried that and it was ridiculous. Haha, the New York Times got punked.

The thing is, I’m not laughing. You wanted Apple to make a 5.5-inch iPhone? This is what you get.

I think we have already been shown Apple’s one-handed mode. The below screen shots are from iOS 8. Both images show interface elements that require just one hand AND you do not need to lift your finger to get from one button to another; you simply slide your finger across the screen.

I think this feature is especially important when using larger phones with just one hand. Lifting your thumb off of the screen requires you to secure the device with your remaining four fingers; this is much harder with larger devices. But, being able to simply slide your thumb across the phone allows the user to maintain steadier control of a large device.

I seriously doubt Apple’s one-handed mode/features will just shrink the displayed area down like we saw with Samsung. I am willing to bet Apple will be moving more toward radial menus and moving the location of important buttons to the bottom half of the screen.




Hush Hush in the Hamptons

NYTimes: A House Built to Baffle

This was Labor Day weekend in the Hamptons. Lines poured out the door of the town’s coffee shop. Traffic was snarled for miles. The scene achieved Times Square-level chaos, only with trees and fresh-baked pies. And yet inside the Masi residence, it was silent.

The couple had even thrown open the sliding-glass wall that runs the length of the room, transforming the yard into a grassy extension of the living space. The only sound was birds chirping.

Although the style of this house won’t please everyone, I think anyone who loves sound engineering could appreciate it. 1

  1. I probably would never buy one but I am a sucker for modern/contemporary houses