Apple’s Next Trick: Making the Retail POS Disappear

apple_logoMobile payments is yet another sector that has fallen into the grips of local. That’s not because of m-commerce (i.e. Amazon Mobile), but the area that’s come to be known as “proximity payments.” This refers to people buying items in physical stores — a much bigger opportunity given the scale of local offline retail.

Proximity payments are divided between receiving payments via mobile, like Square (even though it’s just a good old fashioned credit card swipe); and making retail payments. The latter is subdivided by location-aware apps (PayPal), POS barcode scans (Starbucks) and chicken & egg-throttled NFC.

Despite the nuance between these standards — which generalist media and and analysts tend to lump together as “mobile payments” – there’s one thing they do have in common: disrupting the retail point of sale (POS). But could the answer instead be to think a bit differently: tear down the POS altogether?

One company whose longtime persona has been all about thinking different could do just that: Apple. I’ve been speculating about the model for a few years, which recently took a step towards affirmation by Tim Cook’s earnings comments and some subsequent WSJ digging.

The idea is to enable shoppers to conduct roving transactions throughout retail stores by scanning items with their iPhones, paying on the spot via iTunes then going on their way. No checkout aisles, no gum-snapping shopgirl, no 15 items or less. That’s where the “tearing down the POS” part comes in.

In other words, it creates a world where the mobile device is the POS. It makes sense considering Apple owns the consumer touch point (375 million iPhones) and payment processing (600 million iTunes accounts). The plot thickens with iTouch (payment authentication) and iBeacon (in-store engagement).

Evidence can also be seen in Apple’s own stores: tossing out checkout aisles from the start in favor of roving transactions by store associates. It then provided shoppers the option to take the associate out of the transaction, freeing them to evolve from checkout clerk to more of a shopping consultant.

The next step is to bring that model to third party retailers. Picture it at IKEA: scan an item, pay with iTunes, grab it from the warehouse shelf and be on your way. Meanwhile, iTouch secures the whole thing and iBeacon leads you through the IKEA maze — maybe it even lets you pre-order some meatballs.

For big boxes in general, this model likewise has implications for store layouts. Average revenue per user (via basket size) could increase when you get rid of the bottleneck that is the checkout aisle. That creates an easier environment to buy more things as you wander the Targets of the world. Impulse buyers beware.

Of course, this is all easier said than done. There are security issues like anti-theft tags that would need to be rethought. And who will bag your groceries? The biggest barrier of all will be retail partnerships. But if there’s anyone who can partner with entrenched industries it’s in the process of upending, it’s Apple.

And what would Apple get out of all this? There are transaction fees, but Apple could forgo that as a loss leader towards larger goals. One driving force will be the same that stands behind most Apple moves: competitive features to sell more iThings — its core business where massive margins lie.

The other big gain for Apple is offline transaction data, where 93 percent of U.S. retail spending happens. That could fuel location-based mobile ads (iAd), and Apple’s continued string of “local” acquisitions. Then we could really see the iPhone take a swing at the $5 trillion U.S. retail market.

speaker_MichaelBolandMichael Boland is senior analyst at BIA/Kelsey, where he heads up the firm’s mobile local coverage. Previously, he was a tech journalist for Forbes, Red Herring, Business 2.0, and other outlets.

Mike Boland is Street Fight's lead analyst, author of the Road Map column and producer of the Heard on the Street podcast. He has been an analyst in the local space since 2005, covering mobile, social and emerging tech. More biographical information can be seen at
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  1. Chad Wilson
    February 10, 2014

    While roving transactions are in the queue, Universal Fast Checkout is here. The free allows shoppers to scan items as they shop. Shoppers present their phone at checkout and the cashier scans the barcodes right off their phone. What used to take minutes now takes seconds. Works in any store that can scan a smartphone. Shoppers pay normally as they do today. It speeds up checkout by 4x.

  2. andrew boon
    February 11, 2014

    Mobile commerce is the next big thing for retailers. Mobile will simplify shopping experience for the consumers; retailers need to select the right and secure form of mobile payment system for their store. I work for McGladrey and there’s a whitepaper on the website that
    readers of this article will be interested in, it offers great advice for retailers on how they can increase retail sales and stay ahead of the curve. Thinking
    about tomorrow: Post-recession strategies for retailers

  3. simpleERB
    February 12, 2014

    There are a host of providers trying to persuade restaurants to move to “their”payment system, including sector verticals like OpenTable. This is going to be messy. As an operator, who do I go with? Apple are the ones big enough to make it happen. They have done quite a bit of work on the patent front with restaurants as a specific example , see

    There is going to be a big shake up in the market place for POS providers. Some big incumbents have a long way to fall, but those are in the space who are agile enough and have the best api’s, can benefit.

    1. Mike Boland
      February 13, 2014

      Great point regarding the fragmentation and inevitable shakeout. Right now we’re seeing a marketplace that’s characteristic of emerging technologies — lots of standards battles and experimentation. The market will mature soon and settle into a few large standards. I think Apple is a contender because of the sleeping giant that is iTunes in this context.

  4. Tom Cleveland
    February 13, 2014

    Very logical arguments, but they have been tried before by AT&T in the 80/90s. They, too, sought to leverage their connectivity by getting into the “value/exchange” business with plastic — the result was that their balance sheet got bloated with billions in unsecured debt and potential daylight overdrafts. P/Es fell since they started looking like a bank. Analysts pounded them, and they finally sold off the subsidiary. Apple does not need to be a bank and see their P/E cut in half. Even if they can do it does not make it a value add from their perspective. The POS today is riddled with many small time skirmishes, all seeking critical mass for their selected standard. It won’t happen without banks and security to beat the band — too many people would be gaming the system you describe, forcing overhead up just to stop the thieves. Get banks to be truly real time and then the phone can push a credit directly to the merchant rep or whoever, no POS checkout required… but that is decades off, at best…

  5. April 2, 2014

    Way cool! Some extremely valid points! I appreciate you penning this article… helpful for us thanks for share keep it up!
    And checkout CSO Mobile here about mobile apps for retailers!

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