On April 16, 2010 a savvy investor posted a great report on The Motley Fool investor site in which he stated that "Mobile purchases [and] p2p payments using phones - is a utopia that many telcos, banks, and scheme operations have been looking at for years." On May fourth, the news broke that Visa and DeviceFidelity have been working with Apple on turning your iPhone into a credit card that could be used in restaurants and other retail establishments. Market trials actually begin this summer. At the heart of all this news, of course, is Near Field Communications (NFC) technology. Patently Apple has reported on several new NFC related Apple patents targeting concert tickets, travel and others in recent weeks and today we're finally beginning to roll out a new series of Apple patents relating to financial transactions. In fact, that's the generic branding associated with a new Apple Application shown on iPhone patent figures: Transaction. Today, Patently Apple presents you with two reports covering "Transaction" beginning with Transaction 101. Yeeees – Welcome to Transaction: The financial utopia of tomorrow.
Many payment instruments currently exist and may be used to carry out financial exchanges between two or more parties. For instance, payments may be made using credit cards, debit cards, checks, electronic checks, and cash. In recent years, the growth of electronic commerce has at least partially attributed to attributed to the popularity of credit cards, debit cards, and other non-currency based payment instruments. Further, because a consumer may not always have a precise amount of cash on hand to pay an outstanding invoice or bill, such as to a vendor or retailer, it may, at times, be more convenient to charge the owed amount to the consumer's credit card.
As we move to a more mobile and fast-paced society, the use of cash or currency is being increasingly replaced by electronic transactions using credit cards, debit cards and so forth. Accordingly, it is not uncommon for consumers to hold multiple non-currency accounts concurrently (e.g., multiple credit cards or debits cards corresponding to a respective banking provider), each of which may be dedicated for a particular type of purchase or financial exchange. For example, a consumer may concurrently hold a credit card account that may be dedicated for gas or automotive purchases, a credit card account specifically for travel-related purchases, a general purpose credit card account for miscellaneous purchases, as well as one or more loyalty credit card accounts that may be used only with specific retailers or vendors. In addition, the consumer may also hold, concurrently, one or more debit card accounts associated with respective banking providers.
As can be appreciated, the consumer may make payments or participate in financial exchanges using any of the above-discussed accounts by way of a payment instrument representing the account, such as a credit card. As the number of payment accounts held by the consumer increases, however, it may become increasingly inconvenient to carry such a large number of credit/debit cards. Further, while payments made using the above-discussed accounts may be readily compatible with retailer and vendor businesses, including those established online on the Internet, payments made from these accounts may not always be readily accepted by other consumers or "peers."
A Basic Overview
Apple's patent is directed to various techniques for conducting peer-to-peer financial exchanges using a handheld, portable electronic device – which for the sake of simplicity is represented throughout several transaction-based patents - as the iPhone.
The iPhone may integrate several functionalities for performing peer-to-peer transactions, including the storing information representation a user's payment accounts and crediting accounts, acquiring and sending payment information, and obtaining payment authorization.
One or more input devices, such as a camera or near field communication (NFC) device may be provided for the acquisition of payment information. For example, the NFC device may be used to initiate an NFC connection with an external device for acquiring or sending payment information data. Additionally, the camera device may be utilized in cooperation with an image processing application to extract payment information data from an image of a payment instrument provided by a payor. The electronic device may also be configured to communicate with one or more external servers to acquire an authorization for a payment through a selected communication channel, such as a wide area network (WAN), local area network (LAN), personal area network (PAN), or near field communication channel.
Various functions provided by the iPhone may provide a convenient technique for performing peer-to-peer financial exchanges including group exchanges involving more than two members. In fact, certain aspects may be particular useful in person-to-person transactions conducted between individuals.
Apple's iPhone Transaction System 101
In respect to the nuts and bolts of Apple's future transaction system, we begin with Apple's new Transaction icon/button as seen as on the iPhone figure below as #34. When the transaction icon is selected, the iPhone will open a transaction program and display a transactions menu displaying the various tools and features available in the transaction program.
In Apple's patent FIG. 4 we see is a system overview noted as #90 for conducting a peer-to-peer transaction between a first device, such as an iPhone, being operated by a "payee" and a second device 92 operated by a "payor." The second device may be an iPhone or, in other embodiments, may be a non-portable device, such as a desktop computer or a payment terminal, for example. As used herein, the term "payee" shall be understood to refer to one party in a transaction that is receiving a payment, and the term "payor" shall be understood to refer to another party in the transaction that is making the payment.
As shown in FIG. 4, the device 10, an iPhone, acts as the payee device of the transaction, and the second device 92 acts as the payor device. Initially, the payee device may transmit a payment request, illustrated herein by reference numeral 94, to the payor device. The payment request information 94 may include information relating to the amount of a payment being requested by the iPhone. The payment request information may also include information indicating the identity of the payee, which may include text data corresponding to the name of the payee, an e-mail address belonging to and/or identifying the payee, or any other type of suitable identification information. Additionally, the payment request may further include information indicating the purpose of the payment request. For example, the payment request may be in response to a specific outstanding debt or balance owed to the payee by the payor.
In one embodiment, the payee device/iPhone and the payor device may both be NFC-enabled devices each having a respective NFC device (#46 of the figure above) and NFC interfaces. When the iPhone and the payor device are placed within a close enough proximity or distance to facilitate the establishment of an NFC connection, usually within an inch or two of each other, the RF field generated by the iPhone may induce the NFC device of the payor device to transition to an active mode of operation, thus establishing an NFC connection between the two devices. Accordingly, by way of this established NFC connection, the payment request information may be transmitted to and received by the payor device.
Upon receiving the payment request information from the iPhone, the payor device may display the received payment request information on a display. Thus, the payor may review the payment request information for accuracy and select a payment method to be used in providing the requested payment to the payor. The payment method may be, for example, a credit card account or a bank account belonging to the payee. Accordingly, once the desired payment account is selected, the payment account information, represented as #96 above, may be transmitted to the iPhone.
Upon receiving the payment information from the payor device, the payee may view the payment information on their iPhone display. Thereafter, the payee may select a desired crediting account, which may be stored on the iPhone to which the payment represented by the payment account information is to be credited or deposited. Once the crediting account is selected on the iPhone, the requested payment amount, the payment account information, and the selected crediting account, collectively referred to as the "transaction information" and represented by reference #98 above, may be transmitted by the iPhone to one or more financial servers, noted as #100 above, for verification of the account information and the subsequent authorization and processing of the requested payment.
Regardless of the type of connection established between the iPhone and the financial servers, it should be understood that one or more of the data encryption techniques and security protocols (e.g., SSL or TSL protocols) may be further utilized in order to facilitate the secure transmission of the transaction data to the financial servers.
If it is determined that the selected crediting account is authorized to receive payments from a credit card account, then the transaction data may be further transmitted to a credit card verification server in the form of an authorization request. The credit card verification server may be associated with a credit card company which maintains the payor's selected credit card account, such as American Express, MasterCard or Visa. The credit card verification server may process the transaction information to determine whether a charge to the payor's credit card account in the amount specified in the payment request may be authorized.
It should be noted that the one or more financial servers need not necessarily be limited to financial servers configured to manage monetary assets. For instance, where a transaction involves non-cash assets, such as credits stored in an iTunes account, the financial servers may include a server managed by the iTunes online server (See FIG.18 below). Indeed, these additional embodiments with regard to the interactions of various financial servers are also envisioned within the scope of Apple's patent.
Overview of Various Transactions
Apple's patent FIGS. 12A and 12C noted below illustrate schematic diagrams representing various transactions that may be performed between a future transactions-ready iPhone and a payor device in accordance with the presently described techniques. In general, the embodiments illustrated in FIGS. 12A and 12 B depict several scenarios in which a transaction may be initiated between two NFC-enabled devices by way of an NFC tap operation. One scenario relates to a credit card transaction and the other scenario appears to represent that of a debit transaction. For instance, FIG. 12A illustrates a transaction in which a payment is made by way of a credit card account stored on the payor device in response to a payment request provided by an iPhone.
Beginning with FIG. 12A, the transaction 375 may include the payee device 10/iPhone, the payor device 92, as well as the one or more financial servers 100 which, in the present embodiment, may include a bank server 380 and a credit card verification server 382. To initiate the transaction 375, the payee device 10/iPhone may first transmit a payment request 384 to the payor device.
As discussed above, the payment request may include the amount of the requested payment, the identity of the payee, as well as additional information with regard to the nature or reason for the payment request. As noted above, the payee device 10/iPhone and they payor device 92 may both be NFC-enabled devices. Accordingly, the payment request information may be transmitted from the payee device 10/iPhone to the payor device 92 through the establishment of an NFC connection 388 by way of "tapping" the devices, or performing a "tap operation," as depicted by reference numeral 386.
The Tap Operation
As used herein, the term "tap" and "tap operation," or the like shall be understood to mean the action of placing one NFC-enabled device within the proximity of one or more additional NFC-enabled devices such that an NFC-based connection may be established between the devices. As discussed above, one technique for establishing an NFC-based connection may be through magnetic field induction, whereby a first NFC-enabled device acting as a host device generates an RF field, which in turn induces an NFC device located within a second device to transition from a passive state to an active state, thus establishing an NFC connection. Once established, information may be exchanged between the devices exchanged between the devices by way of the NFC connection.
Referring briefly to FIG. 14C, the establishment of an NFC connection 388 between two devices, namely the payee device 10 and the payor device 92, by way of the tap operation 386 is illustrated. The two devices could be iPhone's or an iPhone to an iMac or other NFC ready desktop.
In Part Two
In Part 2 of this series you'll find a variety of screenshots relating to Apple's proposed "Transaction" application in respect to credit and debit cards, check handling and group invoicing or "split-billing."
Notice: Patently Apple presents only a brief summary of patents with associated graphic(s) for journalistic news purposes as each such patent application is revealed by the U.S. Patent & Trade Office. Readers are cautioned that the full text of any patent application should be read in its entirety for further details. For additional information on any patent reviewed here today, simply feed the individual patent number(s) noted in this report into this search engine. About Comments: Patently Apple reserves the right to post, dismiss or edit comments.
Update - June 14, 2010: The D8 2010 interview with EBay's CEO John Donahoe is available for you below. Mr. Donahoe talks about the iPhone being an e-wallet within the next 2-3 years.