Apple Potential ‘Game Changer’ in Mobile Payments, Says Credit Suisse

Credit Suisse equity research analysts James Kissane and Moshe Orenbuch and colleagues today ponder the take-aways from a conference held last week by the bank to discuss the “future of payments,” by which they mean electronic and mobile payments.

Mobile payments are a roughly $500 billion opportunity, the conference participants believe, and a turf battle between existing transaction processors such as MasterCard (MA) and upstarts such as eBay‘s (EBAY) PayPal will be a big feature on the landscape.

Overall, it’s going to take time, write the authors:

Gating factors include: chicken and egg network phenomena; a compelling value proposition for merchants and consumers; business models and standards have to shakeout. There seemed to be a consensus that over the next 2-3 years we would start to see meaningful POS mobile payment volume.

Kissane and colleagues think Apple (AAPL) is a potential “game changer” in mobile payments, and write that all eyes are on the company’s next move. The company unveiled on Monday a forthcoming program for its iPhone called PassBook that will group coupons, loyalty cards, boarding passes and other consumer retail items that could be scanned for payment at a point of sale:

Hardly a presentation went by where the presenter did not acknowledge that Apple could be a game changer. The consensus seems to believe that Apple has the most potential to disrupt the payment system. It can alter the payments landscape in several ways. Most notably, the inclusion or exclusion of NFC in the iPhone 5 could significantly affect which form factor is adopted for physical payments with the mobile phone (i.e., NFC vs. Cloud-based system). In addition to the iPhone, tablets are increasingly becoming the core unit of new POS systems. Apps have been developed that address everything from supply chain and inventory management to CRM. Just searching Apple�s App Store for �restaurant POS,� we found 36 different apps that could transform our iPad into a POS and restaurant management system. In the future, we believe Apple could become even more disruptive in the payments ecosystem, both directly and indirectly. Directly, the company boasts 400mn accounts on file in its iTunes store (up from 200 million a year ago). The company has also noted in the past that card fees are the second highest expense for its retail stores (behind labor). Indirectly, Apple retail stores have become the model for a new payment ecosystem. By removing its POS lanes, the company freed up on average 200 square feet of additional space. Furthermore, its �Apple Store� app EasyPay functionality allows customers to make purchases in store and walk out without even interacting with a salesperson. AOL