Apple's ITune's Might Extend Dominance to Infinity and Beyond

According to a NY Times column, Apple has 400 million (America *1.3) credit card numbers in its databases from its ITunes store. That’s a mind boggling number of cards, and demonstrates not only the success of ITunes, but the ultimate power of the Apple ecosystem which Google is doing its best to model.
As you probably know, from reading about/using Google Wallet, Google is doing all it can to turn your cell phone into a one stop shopping experience, from Google Offers to Near Field Communication (NFC) chips which allows your SmartPhone to be used as a credit card at the counter (currently only available on the Galaxy Nexus.)
Now, Apple has an IOS app called “Passbook,” which allows users to store gift cards and pre-purchased movie tickets on their phone, which the gift card industry is undoubtedly lamenting as a large part of their profits come from unused cards. Nevertheless, it’s a nice touch, and aimed at keeping up with Google Wallet.
What is the fundamental difference here? Apple has all these credit cards in the ICloud, and aligning them to IPhone users, based on Apple’s closed system of Apple ID’s for all, is child’s play. You can darn well bet your bottom dollar that in the future, Apple phones will contain a NFC chip inside (or something with similar functionality) and the fact that they have every credit card in history registered with them reduces the friction of getting lazy users to enter in their card number. It will merely be, “click here to use your Master Card ending in -x555 to be your default method of payment.”
I want to make a few quick points about this:

1. Like with anything, consumers are slow to change their habits, the bigger challenge to smart phones becoming the default method of payment will be ongoing security issues. Apps being sold in the Apple Store undergo much more rigorous testing than those being sold/given away in Google Play. While neither company has had any major PR disasters, and there are protections (for example, Google had to employ a kill switch last year, retroactively deleting a malware app many users had infected their phones with,) nevertheless, hackers continue to do their best to steal our data in their bid to earn a bust in the Criminal Hall of Fame, as well as, and this might just be a after-thought for them, billions of dollars. It took me close to a month to take the plunge and enter in my credit card into my Nexus for this very reason, despite the $50 Google offered for doing so. Security will remain a huge issue for the foreseeable future, so you better do some due diligence before downloading an app.
2. Although Android has far greater market share than Apple and IOS, and they gave away their operating system specifically for this design, the idea that the IPhone might speed past Android at the checkout counter in ubiquity of use due to their pre-stored credit cards represents a nice coup for Apple. I’m sure they will be play hardball at the negotiating table too, and will lead to a new stream of revenues for the company.
3. Mainly, while I have never liked Apple’s proprietary systems which have the “exclude all others," and the fact that if I have Apple, they make it close to impossible to use anything but their products. It’s a big part of the reason I use Android. Nevertheless, it shows the brilliance of Jobs and Apple once again, that investments made in downloadable music, might be paying off in additional ways as Apple enters the credit card game.
Apple is currently priced at just below 14 times earnings, and with a ton of cash in the bank, and a dividend being paid, IOS Maps (meant to displace Google Maps on the IPhone) announced today, Apple TV and the IPhone 5 coming out sometime in the future (though they weren't introduced today at Apple's WWDC), Apple’s stock might have some legs to continue running up the hill.
I would say buy right now, if I didn’t think the whole hill was awfully slippery, so my recommendation is to wait and if Apple falls 10% as the market declines, well, that steak would just get juicier and juicier for this dog.
The old, tired aphorism is: “Children are our future.” Let’s update to the new reality: it’s smartphones.


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