Yesterday saw the announcement of both the iPhone 6 and Apple Watch in Cupertino with considerable fanfare (and technical streaming issues). Moving further away from Jobs’ dictate of a smaller screen, Apple has taken its cue from Samsung and the general smartphone market by offering both a 4.7” and 5.5” – marking its first foray into the phablet range. A relative late entrant to the market, the iPhone 6 will likely nevertheless help to recapture some of the market share that it has previously lost to Android which now accounts for more than 80% of the total smartphone market worldwide versus Apple’s 12%. While Apple’s market share is considerably higher in the US, it has slipped considerably in recent years as previous iPhone iterations have become increasingly incremental.
Boosting mobile payments
While the iPhone 6 boasts a host of improvements in display, battery life and thinness, the biggest enterprise news is in the inclusion of NFC and the introduction of Apple Pay. Although NFC is not new technology, it has yet to gain mainstream traction as a means of mobile payment. NFC penetration in smartphones has begun to reach critical mass within the last generation of smartphones, with Apple being one of the last major holdouts. With the capability gaining momentum, VDC anticipates that NFC-enabled smartphone shipments are likely to reach 400-500 million in 2014. However, to date, while the technology is there, mobile payments have not taken off to a large extent, as evidenced by the relatively low take-up from Isis Wallet (now SoftCard). This has been primarily a function the trifecta of the lack of NFC-enabled payment infrastructure at checkout stations, general customer disinterest and smartphone shares that are only just reaching critical mass now. However, the sheer force of Apple’s cachet and its ability to bring partners like Target, Starbucks, McDonalds, Macy’s, and Bloomingdale’s could help to update a payment system that CEO Tim Cook noted is 50 years old. But despite the fact that the one-touch payment system shares no credit card information with the merchant and numbers are not stored on the phone, there are nevertheless concerns about the security of Apple Pay, especially in light of the recent security questions surrounding Apple and iCloud last week, in which celebrities' photos were stolen en masse. Given the sheer volume of credit card information that Apple holds and the rise in security breaches within companies like Target and, more recently, Home Depot, these are not idle concerns. With these recent breaches, retailers are on high alert and at least appear to want to do something to secure payments and are finally committing to upgrading their solutions.
The Apple Pay factor
Despite the potential of an NFC-enabled iPhone and the introduction of Apple Pay, the latter is not quite the disruptive move that many had anticipated or hoped for. Instead, Apple is largely taking on the role of enabler/facilitator and working directly with major banks and credit card issuers. While the revenue play for Apple in this scenario is limited, the option provides the greatest near-term boost to mobile payments. One outstanding question that remains is whether Apple Pay will/can directly link checking accounts as a payment option, as PIN code entry becomes an issue.
The wearable people might actually want to wear
With a hint of Jobsian flair, Cook announced that Apple did in fact have one more thing – the announcement of the highly anticipated, much-discussed smartwatch, simply named the Apple Watch. Staying true to its roots in product design, the device seeks to avoid the current hurdle of smartwatches being viewed as miniaturized smartphones strapped to the wrist. Although Apple emphasized the Watch’s high degree of customization, the company remained quiet on the topics of display resolution and, more importantly, battery life. Despite the current lack of specifications, the Apple watch has integrated key features that VDC believes are central to the success of the form factor: namely, the designing of a product that has a markedly different interface and means of interaction than other mobile devices. By supplementing the capacitive touch screen with a navigation wheel/home button dubbed the “digital crown”, the Apple Watch provides a simple and elegant solution to navigation while keeping the display un-obscured. More importantly, though, Apple will be making the API available to developers to create a host of applications that are specific to the form factor. As VDC will be discussing in depth in its report on wearable devices later this month, it is the combination of a rich application development ecosystem and relaying of contextual information in a format optimized for mini-interactions that will be the key to success not just for the Apple Watch, but for wearables as a whole. What remains to be seen, though, is the extent the Apple Watch will succeed as a wearable, given that the device – like other smartwatches with the notable exception of the Samsung Gear S – remains tethered to the smartphone and does not function as a standalone product. Although Apple has engineered and designed a strong product, the market has yet to see a true killer app emerge to solidify the form factor. Nevertheless, the integration of NFC also adds potential to the device that, along with the other aforementioned capabilities, could help make smartwatches finally gain the traction needed to transition to fad to mainstream form factor with far-reaching opportunities within an enterprise setting.