Four reasons why Apple’s Passbook is growing on retailers

Four reasons why Apple’s Passbook is growing on retailers

By Erica Ogg | GigaOM.com, Published: June 27 | Updated: Wednesday, June 26, 11:50 PM

We still have no leader in mobile payments, but when it comes to digital gift cards Apple’s Passbook is doing a decent job of making its case with big-name retailers — many of whom were somewhat skeptical of its utility when Passbook was first went live in fall 2012. CashStar, which makes digital gift cards for several dozen big name brand retailers including Starbucks, Dunkin  Donuts, Sephora, Williams-Sonoma, Gap, Best Buy and others, has good insight into how some of the biggest retail brands are faring with Apple’s digital wallet. And today, nearly 10 months since Passbook’s launch, CashStar released data claiming that about one-third of all digital gift cards that are sent to someone are opened on a smartphone, two-thirds of which are iOS 6 devices. About 30 percent of those are actually added to the Passbook app.Gift cards, of course, are not the only feature of Passbook. The app is intended to be a repository for anything that would be kept in a wallet, including airline and train tickets, coupons, rewards cards, entertainment passes and, yes, gift cards.

Most major airlines have embraced Passbook, as have many movie theaters, ticket companies and some sports leagues. While several big brands like Starbucks and Sephora were on board with Passbook at launch, many other big retailers “weren’t sure what would happen at first,” CashStar VP of Marketing Gene Cornfield told me on Tuesday. “Some took a wait-and-see approach.” But that is very much changing, for several reasons.

Users are starting to understand Passbook: Apple didn’t make it easy to figure out how to use Passbook at first. But, a few months later, it made some important changes. And now, CashStar says every “two to three months” the percentage of digital gift cards added to Passbook is doubling.

People are actually spending money in Passbook: Without being more specific, CashStar says “millions of dollars” in gift cards have been added to Passbook since it debuted. Though the number of users of Passbook gift cards is still in the “tens of thousands.”

Location-based reminders: Lost, left at home, or forgotten gift cards don’t do retailers any good — they recognize revenue dollars from gift cards once they’re redeemed. And it turns out that the location-based alerts built into Passbook are helping them out here.”The geo-fenced reminder of when you’re near a store … is a great prompt for a consumer to spend the balance” of a Passbook gift card,” Cornfield said. “Retailers like it because it brings consumers in the store.” Digital gift cards that get added to Passbook, “with reminders, is actually increasing the redemption velocity even more.”

Training consumers for true digital payments: A lot of the gift cards added to Passbook are indeed gifts. But plenty are cards that customers load for themselves to use basically like money: think Starbucks or Dunkin Donuts cards that are reloaded each month as a quick method to buy coffee with a phone.

Interestingly, if you ask customers if they’d be interested in a mobile payment service, like hooking up a credit card or bank account to a mobile device, they tend to be skeptical and cite security concerns.

“We’re seeing very little if any resistance to putting gift cards, which are as good as cash, on a mobile device,” said Cornfield. People pay with a Starbucks digital gift card 4.5 million times a week — that’s a lot of coffee and a lot of casual use of phones as a payment device. It’s a good way of familiarizing users with the concept of paying by phone.

No one has emerged as a leader in mobile payments, though there are plenty of groups vying for it. But with the software that’s catching on, millions of devices in people’s hands, 575 million credit card accounts, and growing momentum with retailers, Apple is positioning itself quite carefully to be that leader one day — should it want to.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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