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Apple’s fingerprint sensor may be the biggest leap forward in payments since the Amazon Account

Rails/Angular developer, Entrepreneur & YC alum. Previously built and sold Now O(only)TO at and part time partner at Entrepreneur First.

During today’s keynote, Tim Cook mentioned, almost in passing, that you could log into the iTunes store using the fingerprint sensor.

This statement may turn out to have way more significance than its low-key delivery would suggest. It took me a moment to realise it but the fingerprint sensor is almost certainly not about securing your device. The fingerprint sensor is about securing your account. The fingerprint sensor is about payments, initially to Apple and then maybe subsequently elsewhere. The fingerprint sensor may be Apple’s mobile answer to Amazon’s web-bound One-Click.

For every app, music and in-app purchase made through an iOS device there is at least one other that wasn’t made because someone couldn’t be bothered to type in their password, got it wrong or just didn’t know it. Amazon once measured a discernible difference in checkout rates from page loading increases of only 1/100th of a second. Apple has to request a password. That password has to secure the phone against chargebacks due to theft, purchases made by small children or just a trouble-making friend pinching your phone and playing with it. The only answer to those chargebacks today is to demand users to continually re-enter their passwords.

Perhaps even more problematic for Apple is the proportion of their customer base who don’t even know their passwords. A significant proportion of iOS users won’t be able to tell you their password and may not even have a credit card associated with it. Apple must have swathes of older, tech-challenged or simply disinterested customers who never buy any video, music or apps. Those customers are lost revenue for the iTunes store in the short term and are far more vulnerable to churning over to Android in the long term.

Because it’s not the just the revenue from apps that passwords cost Apple. Apps are what make the platform useful, apps are what tie you to your OS and many of the best ones need to be purchased. If you don’t buy apps the platform is significantly less useful to you, you’re far less loyal and you’re far more likely to be swayed by Android. Apps are Apple’s platform lock-in.

I’m guessing that this new scanner won’t just be a piece of hardware Apple ships and forgets about. I’m guessing that Apple will integrate their efforts around the fingerprint and will encourage you to setup your fingerprint and enter your credit card in the Apple store when you buy a new device. I would. They will do everything they can to encourage you to associate your fingerprint with your credit card and free you to one-scan purchase. I’m also guessing that despite its more homebound nature we’ll see that fingerprint sensor very quickly on the iPad too. The iPad is a perfect shopping tool and one-scan shopping would make that even more true.

The fingerprint sensor is way too much technology just to make it easier for you to get past your lock screen. As Tim Cook said, many people don’t even setup a PIN. I think the fingerprint sensor promises to be a far more strategic tool than simply a souped-up login. What the fingerprint sensor may actually deliver is the biggest improvement in frictionless payments since the Amazon account.

Apple has to make big bets to move the dial now and payments is one of those that many people have spoken about. Many people were waiting for Apple to announce NFC and jump into the payments space but I think they may be even cleverer than that. Payments would be a huge new revenue stream for them but easy authentication and chargeback avoidance must have been a large barrier to offering that. If the fingerprint recognition works a well as advertised, that barrier may just have fallen away.

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  1. antoniofonseca reblogged this from peternixey and added:
    I agree.
  2. peternixey posted this