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Apple wants to replace yet another daily tool with your iPhone: your wallet.

Executives from the Cupertino-based technology company have begun discussions with directors from retail store chains about a mobile payments service, according to a source with direct knowledge of the talks. Previous reports indicated that Apple is exploring new payments services through discussions with executives from existing payments companies. These latest mobile payments-related discussions, which have occurred with retail store brands such as those that sell luxury clothing and premium goods, have taken place over the past couple of months, according to the source. The source declined to be named and requested that the identities of the companies talking to Apple not be published.

The Apple mobile payments service would be integrated into iOS Devices such as the iPhone and would be a comprehensive solution that would allow an iPhone user to leverage their device as a form of payment in retail stores. Based on information from various people briefed on the matter, the service would tie directly to iTunes accounts. Apple Senior Vice President Eddy Cue noted last night that Apple has 800 million iTunes accounts with credit cards, and that this arsenal opens up the door for many future products and services. Apple CEO Tim Cook previously hinted that the iPhone’s Touch ID fingerprint identity sensor could someday be leveraged for mobile payment purposes beyond the existing iTunes and App Stores…

The Apple discussions with retail chains included talk about the challenges of building a single payments service that could integrate with various retail stores. Every retail outlet has unique payment and transaction practices, so building a single mobile payments solution will require extensive research from Apple, and the company appears to be in that research and development phase. Apple has also been asking retailers to survey customers regarding potential interest in paying for items with their smartphones and other mobile devices. Apple also has been seeking general insight from retail store chains to see if the companies would be interested in utilizing an Apple payments service.

Apple has also been pushing retail companies to adopt iBeacon location technology, and it is possible that iBeacons could integrate into a future iPhone payments service. iBeacons are small pieces of hardware that could be placed around retail stores in order to pinpoint a customer’s location to a high degree of accuracy. The beacons connect to sensors inside of devices like the iPhone and iPad. Apple’s own retail stores are somewhat of a pilot for Apple’s future mobile payments and iBeacons ambitions as Apple Stores have had an iBeacon-integrated sales experience for a few months. New Apple retail leader Angela Ahrendts is seeking to revamp Apple’s own stores with a mobile payments services, sources said earlier this month.

The sources briefed on Apple’s talks with retailers said that the discussions are exploratory and it does not appear that such an Apple payments service is in the cards to launch in the near future. Apple is holding its Worldwide Developers Conference next week where it will unveil enhancements to its iOS and OS X operating systems, but mobile payments is unlikely to be a topic on the keynote schedule. Earlier this decade, Google tried to develop a similar retail-based mobile payments service via NFC technology, but Apple’s approach is likely to use technologies revolving around iBeacons, low-energy Bluetooth, and Passbook-like scanning, based on Apple’s reluctance to adopt Near-Field-Communication chips in its devices.

While Apple’s discussions with retailers appear preliminary, separate sources confirm that Apple has begun work on the iTunes-based iPhone payments service internally. The project is said to be led by former Apple Online Store chief Jennifer Bailey, and Bailey has formed a team around former managers from various iTunes and mobile hardware projects. Bailey has also hired multiple executives from the payments world to work on the future service. Tommy Elliot, a former senior director for Visa (and the Visa-acquired Cybersource payments company), joined Apple earlier this year to work on the project. Andrew McCarthy, a former top mobile payments executive for J.P. Morgan Chase Bank, and various engineering managers from payments companies such as eBay have also joined Apple.

With a history of seamlessly integrated hardware, software, and services, combined with several hundred million customers with credit cards on file with Apple, Tim Cook and Eddy Cue have the opportunity to expand Apple’s product portfolio with a service that could dramatically shake up the mobile payments and retail world.

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5 Responses to “Apple discussing iPhone payments service with high-profile retail brands”

  1. Quite exciting to hear. hopefully they integrate it for IOS 8. With a bit of luck I can throw away my oyster card as well.
    Oyster card = touch payment for Transport for London

  2. Could someone explain to me how beacons could help in mobile payment?
    Those are supposed to give you an idea of where you are (more precisely they give you an id that a matching app will understand and react to). How does that help?

  3. p0nybl0g says:

    Retailers are already uniting behind a payment solution outside of Visa/MasterCard & including mobile — MCX – Merchant Consumer Exchange —- Mcx.com