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Apple Passbook, does not “PASS” across the spectrum

, October 10, 2012, 0 Comments

“Apple”, a successful closed loop company is slowly moving from overinflated status into business reality. People have different opinions on whether Apple is truly innovative or is it a perfect follower, which can disrupt with any new product launch.

The objective of this article is to discuss about “Apple passbook”, what it can do, what it cannot do, benefits and challenges of it. This is not an article to discuss the stock price, “Apple” as a whole or its merits/demerits along innovation.

What is a digital wallet

“Digital wallets” has been a buzz word for almost a decade and there are several start-ups betting on coming up with innovative mobile solutions in order to replace the physical wallets.

The above statement has the definition of digital wallet: “an application/product which can truly replace a physical wallet, an intelligent system which can greatly improve convenience, security and customer experience”.

Apple Passbook: What it can do

Passbook is just a baby step of a potential full fledged digital wallet. According to Apple – Passbook can consolidate coupons from multiple retailers, hold transit passes, loyalty cards, provide location based push marketing ,dynamic and real time notification services.

Is this really a unique offering compared to other mobile wallets in existence? The answer is a definite “no”, but it’s the trust and brand image that Apple has created among millions of customers that makes them a hot player in the market.

What it cannot do

One key component missing is the ability to pay for products via the mobile application, which is  an important part of a digital wallet. I am sure with 400 million credit card accounts in iTunes and with Easypay application (which is currently restricted for use at Apple retail stores), Apple is in a strong position to integrate payments into its wallet.

Missing payments piece is not be worried about. The real key threat comes from

  • Not so user friendly application

Apple has grown into a mammoth company by re emphasising on superior user experience and ease of use factor among consumers. Based on the comments from first users of Passbook, it certainly misses those unique strengths of Apple.

  • Potential patent implications

Apple started this whole patent fight and now it’s facing challenges from multiple players. Everyone knows the deep pockets of Apple and how it can survive patent wars, but the problem here is the patent infringement will affect thousands of developers and potentially all retailers who would use Passbook. Not many developers/merchants want to get into multi layer licensing agreement

Key stakeholders and implications

Even though Passbook involves numerous stakeholders, I would like to analyse the implications on top two stakeholders and see how the challenges faced by them lead to third (probably the most benefited) stakeholder in the system. Clearly developer community emerge as winners through this whole ecosystem.


Third-party Apple developers like Belly, PassRocket and Tello have already announced solutions to help small businesses with Passbook.  In near future we will see array of small start ups to offer such solutions.

So is “Apple Passbook” the future of digital wallets?

It is too early to comment on the future of Passbook, but definetly Apple has not succedded across the spectrum. I am sure Apple does not want to be just an aggregator of mobile apps and a channel of delivery.

Passbook is a great solution which would distrupt ticketing industry (Airline, Movie passes), but going back to our definition of digital wallet – a successful solution is one which can be accessed across the spectrum of industries and channels.

Consumers will not widely adopt any wallet solution unless it is ubiquitously accepted across small/large merchants. Small merchants need a solution which can be readily deployable; Apple Passbook is clearly not there yet.

Large merchants will not invest in revamping/integrating their exisitng infrastructure unless they see a clear long term value and large scale customer adoption of wallet solutions. It’s a chicken or egg problem.

Merchants are well informed of Mobile trend and they are trying to build a solution themselves known as Merchant Customer Exchange (MCX).

Large merchants have joined hands to protect their consumer data and to develop a cost effective solution, specially aimed at reducing the current interchange structure. MCX is a topic in its own; I will reserve it for a future discussion.

Apple is in the heart of consumers, but can it win the hearts of merchants?  Specially the smaller ones? Its definetly harder than winning consumer’s heart






About author
Karnan Ariaratnam is a graduate from the SRM university and a Post-graduate (MBA) from Schulich school of business, based in Toronto, Canada. Karnan focuses on strategic analysis of companies and evaluate them based on macro trends, environment in which the firm operates and their financials. A leader in making who aspires to build and develop highly motivated teams, which focuses on creating innovative solutions for complex business problems that leverages inherent system strength. Karnan believes in continuous learning & sharing and is in the process of developing an organization - "Integrate", that he co-founded to help underprivileged children's in India. ...more