Will Apple Announce an Electronic Wallet on Tuesday?

09/05/2014 5:21 pm EST

Focus: STOCKS

Jim Jubak

Founder and Editor, JubakPicks.com

The anticipation for this tech powerhouse’s big event on Tuesday is palpable, but unlike Wall Street analysts or consumers eager for a new iPhone, MoneyShow's Jim Jubak is more interested in near field communications technology.

Sure, we all want to see the new iPhone 6 at Apple’s (AAPL) big event on Tuesday, September 9. Will the company have both the 4.7-inch and 5.5-inch larger screen phones ready to roll out soon after the announcement?

And Wall Street, at least, (I can’t speak for consumers) is waiting with bated breath for an announcement on the iWatch that includes a firm date on when it might go on sale. (Betting right now is for early 2015, which would mean missing the holiday shopping season.)

Me? I want to know if Apple is finally going to add a near field communications chip to its phones. Over the next couple of years, giving the iPhone the ability to speak to other devices just by putting the phone in proximity to them has the potential to give Apple exactly what it needs right now—new markets.

What’s near field communications?

It’s a technology, already available on many Android and Windows smartphones, that allows handsets to speak to point-of-sales terminals (pay with a swipe of your phone rather than a swipe of a plastic card) and to an increasing number of the devices that make up the Internet-of-Things. The technology comes in three flavors: tag reader and writer, device-to-device, and card emulation. Rumors have it that Apple will add a near field communications chip from NXP Semiconductor (NXPI), a Dutch company that already supplies the M7 motion chip that allows the iPhone 5S to collect, store, and analyze motion data even when the phone is turned off.

One reason to think that these rumors have substance is that Apple is clearly talking with American Express (AXP), Visa (V), and MasterCard (MA) about turning the iPhone into an electronic wallet. The envisioned electronic payments application would allow iPhone users to pay with a touch of their phone at checkout rather than forking over cash or swiping a credit card.

Apple wouldn’t be the first into this market—the Samsung Galaxy 5S has near field capability—but Apple might be able to jump start a market that has yet to take off with consumers. One key advantage for Apple is the 800 million users of its iTunes who have already given the company credit card data. Another potential advantage is the extra security that Apple could provide through the fingerprint technology, Touch ID, that it now uses on the iPhone 5S.

Trust is a key issue. Which is why the recent stories about hackers accessing nude photos of celebrities from Apple’s iCloud storage service have come at a particularly awkward time for Apple. And it’s also why Apple has been quick to announce new security features for iCloud. Reading through the list—notification if anyone tries to access your account through a new device, for example—it sounds a lot like the security measures that credit card companies already use. (Which makes me suspect the influence of American Express, Visa, and/or MasterCard.)

Exactly how Apple might get paid is one big open issue. The other is how fast an electronic wallet from Apple might catch on. I don’t see this providing a short-term big addition to Apple’s revenue or earnings line. But it is one more clue to what CEO Tim Cook sees as Apple’s competitive advantage in the smartphone and tablet markets.

More on my take on Tim Cook’s vision on Monday on the eve of Apple’s big announcement. Apple is a member of my Jubak’s Picks portfolio.

Full disclosure: I don’t own shares of any of the companies mentioned in this post in my personal portfolio. When in 2010 I started the mutual fund I managed, Jubak Global Equity Fund, I liquidated all my individual stock holdings and put the money into the fund. The fund shut its doors at the end of May and my personal portfolio is now in cash. (Please don’t read a market call into that cash position. It’s simply taking time to wind down the management company behind the fund.) I anticipate putting those funds to work in the market over the next few months and when I do I’ll disclose my positions here.

The anticipation for this tech powerhouse’s big event on Tuesday is palpable, but unlike Wall Street analysts or consumers eager for a new iPhone, MoneyShow's Jim Jubak is more interested in near field communications technology.

Sure, we all want to see the new iPhone 6 at Apple’s (AAPL) big event on Tuesday, September 9. Will the company have both the 4.7-inch and 5.5-inch larger screen phones ready to roll out soon after the announcement?

And Wall Street, at least, (I can’t speak for consumers) is waiting with bated breath for an announcement on the iWatch that includes a firm date on when it might go on sale. (Betting right now is for early 2015, which would mean missing the holiday shopping season.)

Me? I want to know if Apple is finally going to add a near field communications chip to its phones. Over the next couple of years, giving the iPhone the ability to speak to other devices just by putting the phone in proximity to them has the potential to give Apple exactly what it needs right now—new markets.

What’s near field communications?

It’s a technology, already available on many Android and Windows smartphones, that allows handsets to speak to point-of-sales terminals (pay with a swipe of your phone rather than a swipe of a plastic card) and to an increasing number of the devices that make up the Internet-of-Things. The technology comes in three flavors: tag reader and writer, device-to-device, and card emulation. Rumors have it that Apple will add a near field communications chip from NXP Semiconductor (NXPI), a Dutch company that already supplies the M7 motion chip that allows the iPhone 5S to collect, store, and analyze motion data even when the phone is turned off.

One reason to think that these rumors have substance is that Apple is clearly talking with American Express (AXP), Visa (V), and MasterCard (MA) about turning the iPhone into an electronic wallet. The envisioned electronic payments application would allow iPhone users to pay with a touch of their phone at checkout rather than forking over cash or swiping a credit card.

Apple wouldn’t be the first into this market—the Samsung Galaxy 5S has near field capability—but Apple might be able to jump start a market that has yet to take off with consumers. One key advantage for Apple is the 800 million users of its iTunes who have already given the company credit card data. Another potential advantage is the extra security that Apple could provide through the fingerprint technology, Touch ID, that it now uses on the iPhone 5S.

Trust is a key issue. Which is why the recent stories about hackers accessing nude photos of celebrities from Apple’s iCloud storage service have come at a particularly awkward time for Apple. And it’s also why Apple has been quick to announce new security features for iCloud. Reading through the list—notification if anyone tries to access your account through a new device, for example—it sounds a lot like the security measures that credit card companies already use. (Which makes me suspect the influence of American Express, Visa, and/or MasterCard.)

Exactly how Apple might get paid is one big open issue. The other is how fast an electronic wallet from Apple might catch on. I don’t see this providing a short-term big addition to Apple’s revenue or earnings line. But it is one more clue to what CEO Tim Cook sees as Apple’s competitive advantage in the smartphone and tablet markets.

More on my take on Tim Cook’s vision on Monday on the eve of Apple’s big announcement. Apple is a member of my Jubak’s Picks portfolio.

Full disclosure: I don’t own shares of any of the companies mentioned in this post in my personal portfolio. When in 2010 I started the mutual fund I managed, Jubak Global Equity Fund, I liquidated all my individual stock holdings and put the money into the fund. The fund shut its doors at the end of May and my personal portfolio is now in cash. (Please don’t read a market call into that cash position. It’s simply taking time to wind down the management company behind the fund.) I anticipate putting those funds to work in the market over the next few months and when I do I’ll disclose my positions here.

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