Apple Pay day some ways off

A Reuters piece I wrote with two colleagues on Apple’s efforts to break the mobile payments logjam (and catch up with China and Africa). In the long run, of course, they’ll likely carve out a decent business, but it’s not as smooth as it might be, and the impression we got was that Apple was facing problems not only convincing partners to jump aboard, but to make sure the process was as Apple-like for consumers as possible.

It’s an interesting conundrum that Apple faces: pretty much everything they have to do now is about ensuring their gadgets interact with worlds they can’t control – from payments to cars.

Early days, but Apple Pay struggles outside U.S.

BY MATT SIEGEL, JEREMY WAGSTAFF AND ERIC AUCHARD

More than 18 months after Apple Pay took the United States by storm, the smartphone giant has made only a small dent in the global payments market, snagged by technical challenges, low consumer take-up and resistance from banks.

The service is available in six countries and among a limited range of banks, though in recent weeks Apple has added four banks to its sole Singapore partner American Express; Australia and New Zealand Banking Group in Australia; and Canada’s five big banks.

Apple Pay usage totaled $10.9 billion last year, the vast majority of that in the United States. That is less than the annual volume of transactions in Kenya, a mobile payments pioneer, according to research firm Timetric.

And its global turnover is a drop in the bucket in China, where Internet giants Alibaba and Tencent dominate the world’s biggest mobile payments market – with an estimated $1 trillion worth of mobile transactions last year, according to iResearch data.

Anecdotal evidence from Britain, China and Australia suggests Apple Pay is popular with core Apple followers, but the quality of service, and interest in it, varies significantly.

To use Apple Pay, consumers tap their iPhone over payment terminals to buy coffee, train tickets and other services. It can be also used at vending machines that accept contactless payments.

Apple Pay transactions were a fraction of the $84.5 billion in iPhone sales for the six months to March, which accounted for two-thirds of Apple’s total revenue.

TECH HITCHES

In Australia, where Apple Pay launched a month ago, payment machines supported by one mid-sized bank reported frequent failures.

“Bendigo Bank is experiencing some unforeseen technical issues in accepting Apple Pay payments at selected merchant terminals,” a spokeswoman for the bank told Reuters, adding that a lack of wider industry engagement in launching the service limited the lead time in testing the new technology.

Apple Vice President Jennifer Bailey said such experiences were premature and not representative. “Like any set of major technology changes, it takes time,” she said. “We want to move as quickly as possible, we push it as quickly as possible.”

Facing a slowing smartphone business, Apple has taken on the payments market hoping to add ways to make its devices more appealing, and more revenue streams. Apple takes a cut of up to 15 cents in the United States on every $100 spent.

While it has long mastered the supply chain for its mobile devices, the payments ecosystem has proved harder to control, and banks in other countries have reportedly negotiated lower transaction fees, contributing to its slow global roll-out.

Apple nearly doubled its R&D spending to more than $8 billion in 2013–15 as it pushed out a wave of new products including Apple Watch and Apple Pay, as well as upgrades to existing hardware devices and new services.

RESISTANCE

Apple has leveraged its huge U.S. user base to push Pay, but has met resistance in Australia, Britain and Canada where banks are building their own products.

“Payments in general is such a complicated system with so many incumbent providers that revolutionary change like this was not going to happen very quickly,” said Joshua Gilbert, an analyst at First Annapolis Consulting.

The upshot: Apple has rolled out Pay in a dribble, adding countries and partners where it can – Hong Kong is expected to be added next – resulting in an uneven banking landscape with users and retail staff not always sure what will work and how.

In Britain, for example, $14 billion was spent via contactless cards last year, according to Windsor Holden, a Juniper Research analyst. That makes it harder to persuade people to take the extra step on their smartphone for the same checkout convenience.

“You have over 86 million contactless cards in circulation, you have to persuade Britons to register their cards to the (Apple Pay) service when they can already use them to make a contactless payment,” Holden said.

In Australia, where more than 60 percent of all card transactions are through contactless cards, reception has also been muted. A spokesman for one large retailer said he had seen “very little uptake of the payment option” in his sector. He didn’t want to be named as he was not authorized to speak publicly about the matter.

Diego Machuca, 32, banks with Apple Pay-holdout Commonwealth Bank, has an iPhone and is already “largely cashless”. He says Apple Pay is appealing, but he wouldn’t switch banks just to access that one feature. “Not over that. There’s too much work involved just for tap-and-go,” he told Reuters.

Three months after the China launch, users on online forums complained that using Apple Pay, even at popular fast-food outlets, was not as seamless as local services such as WeChat, Tencent’s messaging and mobile commerce phenomenon.

Nonetheless, Apple’s approach has spurred development in several markets where the mobile payments industry had previously not taken hold – giving it the jump on rivals Google’s Android Pay and Samsung Pay.

Android Pay only launched in the United States in March and in Britain last month for use on the latest model Android phones. Samsung Pay is available in three markets; China, South Korea and the United States.

(Reporting by Matt Siegel in SYDNEY, Jeremy Wagstaff in SINGAPORE, Eric Auchard in LONDON and Beijing Newsroom; Editing by Ian Geoghegan)

Apple Takes on Evernote?

Apple’s update to OSX allows users to import Evernote notes into Notes (if you see what I mean) painlessly and effectively: Import your notes and files to the Notes app.

As far as I know, this is the first time an app with some heft has included this capability — there are third party tools for OneNote, but no native functions. 

To me, this is the first serious challenge to Evernote, since why would you bother with Evernote if you’re an iOS and OSX user? 

There are limitations, I suspect. I can’t find any way to add tags and it seems the tags preserved in an enex/xml file are lost on import. That’s a showstopper for me. And of course some of the deeper features of Evernote aren’t there — saved searches and what have you. And if you use Android and/or Windows this is not going to help you.

But I suspect the bigger thing for most heavy users will be a sigh of relief that a player like Apple sees it worthwhile to add this feature. For many users there’s been growing disquiet as to just how  long ‘Ever’ means for the company, and the ramifications for their vast Evernote collections. 

iPad Pro Thoughts

Jean-Louis Gassée again hits the right note in his piece on the iPad Pro: Wrong Questions | Monday Note. Tim Cook shouldn’t go around saying it will replace the laptop. It might for him, but the laptop/PC has evolved to be used in myriad ways, not all of which are best suited to a big screen and unwieldy, optional keyboard. 

Why not say that the iPad Pro will helpfully replace a laptop for 60%, or 25% of conventional personal computer users? In keeping with Steve Jobs’ Far Better At Some Key Things formula, why not say that the iPad Pro is a great laptop replacement for graphic designers, architects, mechanical engineers, musicians, videographers…and that the audience will grow even larger as new and updated apps take advantage of the iPad Pro’s screen size, speed, and very likable Pencil.

And it’s not just that. Taking up his and others’ theme that at each stage of hardware evolution we’ve lacked the imagination to realise what these devices might best be used for, I imagine the big screen and power of the iPad Pro will yield uses that we so far have not considered. 

As with wearables, these devices are as much about creating (this is something I’ve never been able to do before) or extending new markets (I could do this before, but it wasn’t much fun) as anything else. I’m not about to replace my laptop with an iPad Pro, but I could see a lot of things I would love to do with it — music editing, photo editing and organising, and maybe a bit of doodling. As in Horace Dediu’s video  The new iPad is like nothing we’ve ever seen before there’s lots of great visualization possibilities too. 

Is it a work tool? Could be, for some industries. It’s not a very mobile beast. 

The question is: while developers see enough reward in supporting it with apps? 

Cook: 3D Touch a Game Changer

I think 3D Touch is the most important thing that Apple has done for a while, and I think as with all such things we don’t really see it until later. Cook seems to agree: 20 Minutes With Tim Cook – BuzzFeed News:

“But he’s most excited by 3D Touch. ‘I personally think 3D Touch is a game changer,’ he says. ‘I find that my efficiency is way up with 3D touch, because I can go through so many emails so quickly. It really does cut out a number of navigational steps to get where you’re going.’ Even with just a quick demo, it’s easy to see his point. It’s a major new interface feature, one that threatens to upend the way we navigate through our phones, especially once third-party developers begin implementing it in their applications. Apple has engineered the hell out of this 3D Touch to ensure they’ll do just that.

For Cook, 3D Touch is a tentpole feature of not just the iPhone 6s series, but of the iPhone itself and one that shows the company isn’t saving marquee innovations for those ‘tick’ years. ‘As soon as products are ready we’re going to release them,’ Cook explains. ‘There’s no holding back. We’re not going to look at something and say ‘let’s let’s keep that one for next time.’ We’d rather ship everything we’ve got, and put pressure on ourselves to do something even greater next time.’”

Force field: Apple’s pressure-based screens promise a world beyond cold glass

A piece looking at the technology behind the pressure sensing. My prediction: once people play with it they’ll find it hard to go back to the old way of doing things. Maybe typing on an touchscreen may one day feel natural, and maybe even enjoyable. 

Force field: Apple’s pressure-based screens promise a world beyond cold glass | Reuters:

SINGAPORE/TAIPEI | BY JEREMY WAGSTAFF AND MICHAEL GOLD

By adding a more realistic sense of touch to its iPhone, Apple Inc may have conquered a technology that has long promised to take us beyond merely feeling the cold glass of our mobile device screens.

In its latest iPhones, Apple included what it calls 3D Touch, allowing users to interact more intuitively with their devices via a pressure-sensitive screen which mimics the feel and response of real buttons.

In the long run, the force-sensitive technology also promises new or better applications, from more lifelike games and virtual reality to adding temperature, texture and sound to our screens.

‘Force Touch is going to push the envelope of how we interact with our screens,’ says Joel Evans, vice president of mobile enablement at Mobiquity, a mobile consultancy.

The fresh iPhones, unveiled on Wednesday, incorporate a version of the Force Touch technology already in some Apple laptop touchpads and its watches. Apple also announced a stylus that includes pressure sensing technology.

As with previous forays, from touch screens to fingerprint sensors, Apple isn’t the first with this technology, but by combining some existing innovations with its own, it could leverage its advantage of control over hardware, interface and the developers who could wrap Force Touch into its apps.

‘Here we go again. Apple’s done it with gyroscopes, accelerometers, they did it with pressure sensors, they’ve done it with compass, they’ve been great at expediting the adoption of these sensors,’ said Ali Foughi, CEO of US-based NextInput, which has its own technology, trademarked ForceTouch. ‘Apple is at the forefront.’

TOUCHY FEELY

Haptic technology – a tactile response to touching an interface – isn’t new, even in mobile devices. Phones have long vibrated to alert users of incoming calls in silent mode, or when they touch an onscreen button.

But efforts to go beyond that have been limited.

BlackBerry incorporated pressure sensing into its Storm phone in 2008. And Rob Lacroix, vice president of engineering at Immersion Corp, said his company worked in 2012 with Fujitsu on the Raku-Raku Smartphone, an Android phone that could distinguish between a soft and firm touch to help users unfamiliar with handheld devices.

But most efforts have been hamstrung by either a poor understanding of the user’s needs, or technical limitations. A vibrating buzz, for instance, has negative connotations, causing most people to turn off any vibration feature, says James Lewis, CEO of UK-based Redux, which has been working on similar touch technology for several years.

The technology powering vibrations is also primitive, he said, meaning there’s a slight delay and a drain on the battery. Early versions of pressure-sensing technology also required a slight gap between screen and enclosure, leaving it vulnerable to the elements.

Apple seems to have solved such problems, experts said, judging from their trackpads and the Apple Watch. Indeed, the trackpad carries the same sensation of a physical click of its predecessors, but without the actual pad moving at all.

The result: In the short term, Force Touch may simply make interacting with a screen more like something we’d touch in real life – a light switch, say, or a physical keyboard. With Force Touch, the device should be able to tell not only whether we are pressing the screen, but how firmly. It should in turn respond with a sensation – not just a vibration, but with a click – even if that click is itself a trick of technology.

‘What we’re going to see initially is putting life back into dead display,’ said Redux’s Lewis. ‘We just got used to the cold feel of glass.’

HARD PRESSED

To be sure, mobile is not the first industry to flirt with haptics.

For example, for car drivers, Redux demonstrates a tablet-like display which creates the illusions of bumps and friction when you run your fingers over the glass, mimicking physical buttons and sliders so your eyes don’t need to leave the road.

Mobiquity’s technical adviser Robert McCarthy points to several potential uses of Apple’s technology – measuring the force of touch when entering a password, say, to indicate how confident the user is of their selection, or keying in a numeric passcode using different pressure levels as an extra layer of security.

While Apple’s adoption of the technology has awoken the mobile industry to its possibilities, it was pipped to the post by Chinese handset maker Huawei, which this month unveiled one model with what it also tagged Force Touch technology. Pressing harder in a photo app, for example, allows you to zoom in on a picture without the usual two-finger spread.

Other manufacturers are exploring how to make touching a device more friendly, and more advanced, says Freddie Liu, CFO of Taiwan-based TPK Holding Co Ltd, an Apple supplier.

‘This is just the beginning for Force Touch,’ he said.

(Reporting by Jeremy Wagstaff and Michael Gold, with additional reporting by Reiji Murai in TOKYO; Editing by Ian Geoghegan and Raju Gopalakrishnan)”

Factbox: iPhone 3D Touch suppliers and haptics companies | Reuters

Behind the iPad’s sluggish sales

Sameer Singh offers some possible reasons for the fall in iPad sales: 

Pocketable vs. Tablet Computing | Tech-Thoughts by Sameer Singh: “With this background, the sudden decline in iPad sales may have been caused by a combination of the following factors:

  • Most high-end consumers who need iPads already own them (and as some analysts have pointed out, replacement cycles are long) 
  • Large screen smartphones have made media tablets somewhat redundant, i.e. the iPad is no longer a ‘necessary’ purchase for ‘phablet’ owners 
  • The iPad is priced out of the market segment that still finds media tablets ‘necessary’ 
  • Upmarket movement is limited because tablet use cases still haven’t evolved to cannibalize more productivity-related computing tasks (I may have overestimated the pace at which this would occur)”

To which I’d add: 

The iPad is in some ways closer to a PC than a phone in its utility vs luxury ratio. People upgrade their phones because they’re visible accessories, something that says something about the person holding it. Computers have barely hit that bar, and maybe iPads — especially since users usually cloak them in a stand/cover — don’t quite make it either. So unless there’s a really compelling performance/spec reason to upgrade, most don’t bother.

I’ve not seen data on this, but anecdotally most people I know get an iPad and then settle, rather than upgrading when the next one comes out. Of course the lack of telco subsidy for most iPad purchases adds to this. 

It’s not that iPad isn’t a great idea, but it turns out that the smarter move in a way has been to increase the size of the phone (phablet) rather than shrink the size of the computer (the iPad), at least in terms of getting people to upgrade. 

Software as Silo

Software is a funny thing. How important is it?

Apple has just announced it’s giving most of its away for free — effectively costing it some $900 million in the short term. Samsung has just convened its first developer conference in the hope of persuading more people to write software for its devices. Microsoft, known for its Office and Windows software, has just bought a phone manufacturer — Nokia — and promises a new raft of its lacklustre Surface tablets. Google, known for the money it makes off its software, has promised more Glasses, and owns a cellphone maker, Motorola. Amazon, which sells stuff, also makes tablets and e-readers, and is rumoured to be getting into a phone.

What companies are increasingly recognising is that software is everything but not on its own. To succeed in this new world of ubiquitous devices, you need to own as much as possible of what is loosely referred to as the ecosystem. That means hardware, software, and the services that make both hardware and software come to life.
Think a phone where you can take videos, edit them into a short movie at literally the push of a button, and then share them with friends with another push. Or a tablet that lets you and control see your company’s inventory or fleet of trucks in real time.

But this isn’t easy. It requires expertise in very different areas — areas that until recently were regarded as best considered separate industries. Focus on what you’re good at, the mantra used to be. Now, it’s more like: you’ve got to be good at all these things, or you’ll die. Think HTC, which makes great devices but hasn’t succeeded in building the software and services that makes those devices stand out.

Some companies can be good at all three, but it’s a fast-moving game. Think BlackBerry, which was good at both hardware, software and services for a while, with its email service, its own operating system and its keyboard-bound devices. But the world moved on, and BlackBerry didn’t move quickly enough.

So now it looks like Apple is heading the pack. But it too, is vulnerable. The world has been captivated by the phones and tablets it creates, but some detect a sense the company, without Steve Jobs, quite understanding where to go next. It’s likely to be an Apple TV, which should be interesting.

Samsung is late to the game, dangerously so. It dominates the world of phones, but has been slow to build software and services to bridge those devices to its other products — computers, TVs, fridges, etc. Only this week has it really embraced developers and tried to make it easy for them to do this. Samsung’s future hinges in being able to rid itself of its dependence on Google’s Android operating system — either by building an operating system of its own, or a suite of apps that run on top of it that make a Samsung device so much more valuable than one from LG, Sony, HTC or Huawei.

Then there’s Microsoft. By making its operating system and much of its software free, Apple has thrown down the gauntlet to its old rival. It’s not saying these products have no value: it’s saying that software is what makes hardware compelling, and so we’re effectively making the two one single product. For Microsoft, still largely a software player, that’s quite scary. No wonder the company is betting heavily on building its own hardware.

In some ways this is good for the consumer, in some ways not. On the one hand we’re already seeing the hardware basically controlling the software — automatically updating itself, optimizing itself for the user. On the other, the goal here is clear: bind the user to a single stack of hardware, software and services, increasingly isolated from each other. A Samsung phone may be a great device to control your TV with, layering little apps atop the screen, but don’t expect it to work with your LG smart TV. And don’t bother trying to use Apple’s AirDrop feature to send a file to your Samsung phone.

The bottom line is that these companies are being hugely innovative, moving the puck at impressive speed. But in their efforts to escape becoming commodities, they’re pushing us into silos. Nice silos, very nice silos, but silos that make me think more of the past than the future.

Cuckoonomics

Here’s a piece I wrote for the BBC which went out today. (They often air some time after I’ve recorded them.) 

It’s very hard to be in the technology business these days because you don’t know when someone is going to be a cuckoo, A cuckoo, in case you are not an ornithologist, are what are called brood parasites, which means they lay their eggs in another bird’s nest — effectively outsourcing the whole brooding process.

Technology players have been playing this game for a while. The problem is that no one is quite sure who is the cuckoo, who is the sucker and what’s the nest. I call it cuckoonomics.

Take the recent spat between Apple and Google. Google was quite happy to have its Maps software on an iPhone — after all, it makes more money from an iPhone than it does from a phone running its own Android software — but it didn’t want to give away the farm. So it wouldn’t allow a feature which allowed users to navigate turn by turn. So Apple ditched the whole thing and went, somewhat disastrously, with its own version of maps.

Google in this case thought it was being a cuckoo, and the iPhone was the nest. But it didn’t want iPhone users enjoying the product so much that its own users jumped ship. 

In the old days technology was about hardware. Simple. You make something, put a sticker on it, and sell it. That’s all changed. Now it’s about software, about services, about experience. I may run an expensive telecommunications network but I can’t control what goes on it. Cuckoos offering video, games, messaging etc flock onto it, parking their eggs and reaping the benefits.

It happens in more subtle ways, though the implications may be just as drastic. Microsoft is about to launch a new version of its operating system called Windows 8. It’s quite quite different from before and a major gamble; not surprising, because Microsoft’s once cushy nest is being dismantled by Macs, mobiles and tablets.

It’s a brave attempt by Microsoft, but what’s interesting to me is how they’ve aimed their sights not at Apple but at Google. Microsoft have baked search so far into their new operating system they hope it will be where we do most of our stuff. From one place we can search all our apps, the web, our contact list, our saved notes and documents.

Of course this isn’t new. You can do this on a Mac, on an iPad, on an Android phone, even on a Windows PC. But it’s not been quite as well done before.

I’ll wager if Windows 8 catches on this will be one of its biggest features, and Google as a result will take a hit. Which is ironic because it’s been Google who have used cuckoonomics against Microsoft for more than a decade, gradually building a library of services around search that have ended up taking over Microsoft’s nest. Think Gmail taking over Outlook and Hotmail; Docs taking over Office, and then eventually the Chrome browser taking over Internet Explorer. 

What’s intriguing is that Microsoft is also trying to the same trick with Facebook. Windows 8 dovetails quite nicely with your Facebook stuff but at no point does it look like Facebook. I couldn’t find a Facebook app for Windows 8 but it didn’t seem to matter; instead all my Facebook friends, updates, photos and messages all appeared within Windows 8 — with rarely a Facebook logo in sight. 

Which cuckoo is going to win? 

Forks in the Road Ahead?

Two interesting pieces in the past 24 hours that, almost in passing, look at a growing conundrum for Google: how to cope with the fact that Android is largely a profit center for Samsung and nobody else.

Horace Dediu at Asymco (From bad to worse and from good to great) looks mainly at how the mobile world’s value is mostly going to Apple. Samsung is the only other one making any money out of the whole thing:

In absolute terms the iPhone franchise created $244 billion in value while Samsung created $83 billion. The others destroyed $37 billion.

Elsewhere Horace has looked at Android economics (The Android Income Statement among others) and concludes that “Google’s benefit from the platform is modest. He concludes:

In contrast, Samsung, and Samsung alone, is benefitting greatly. It could even be said that today Samsung is the only Android profit engine.

This seems to be the case. Which prompts several questions, some of them addressed in the comments. Is Samsung likely to continue merely taking another person’s operating system, free though it is, and adding a skin or two? How does Samsung feel about sharing a brand — Nexus — with competitors like Asus?

Jean-Louis Gassée in his weekly column for the Monday Note takes a look at this (Business Model Dances). Google, he argues, have not necessarily followed Microsoft by extending vertically with the Nexus 7, but he does believe that “the gentle folks at Samsung are not going to take this with a smile and a quick genuflection.”

If they’re not cowed by Apple, they certainly aren’t going to let Google eat into their tablet business. As for phones, there’s Google’s $12.5B subsidiary, Motorola Mobility, another irritant for Samsung and other Android smartphone makers.

It’s interesting to consider whether Samsung think that the Nexus 7 is a challenger. I tend to think they’re more worried about what’s behind it: lots of content.

As Jean-Louis says, it’s going to be interesting.

On the ropes, Apple’s China nemesis still dreams

Here’s a piece I wrote with Lee Chyen Yee about the man and company behind the iPad trademark battle in China.

(Reuters) – Yang Long-san, Apple’s nemesis in a battle over the iPad trademark in China, once strutted the expo halls with dreams of market dominance. His company, Proview, may now be in ruins and his most valuable asset a disputed trademark, but those dreams remain intact.
“My biggest wish is to resolve all these frustrating problems and put them behind me,” Yang said in a recent telephone interview. “If we can resolve all the problems we have now and I have a chance to make a comeback, I’d still want to overtake my old competitors.”
Much of that will depend on whether he wins a long-running dispute over ownership of the trademark in China – Apple’s second-biggest market by revenue. Although a recent decision by the Shanghai district court to reject Proview’s demands that Apple stop selling the iPad was a setback for Proview, the case is still to be heard in the higher court in the southern Chinese province of Guangdong Wednesday.
A decision against Apple there would set a precedent that would create an uphill battle in other cases in lower courts around China. Local media have said Proview is seeking up to 10 billion yuan ($1.6 billion) in compensation.
Proview’s fortunes may currently be the polar opposite of Apple – one has creditors at the door and the other is the world’s most valuable listed company – but both illustrate how the fickle world of technology can make or break a company.
Yang and Proview rode the first wave, when every home and office desk had to have a computer, and a screen. For Apple, the last decade has seen it ride the crest of a new wave where the computer moved from a commoditized, clunky desktop to a fashionable mobile consumer device.
Proview may now be a shadow of a company, trying to convert its last major asset into cash, but it was not always so. “They definitely existed,” says IDC analyst Rhoda Alexander, who covered them for a while. “They were a significant manufacturer and a major player.”

The full story can be found at reuters.com