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The Next iPhone Could Forever Change How We Spend Money

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IPHONE MOBILE WALLET
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If Apple has its way, you may soon be ditching your plastic- and paper-stuffed George Costanza wallet and paying for things with a tap or swipe of your iPhone.

Wired reported last week that the next iPhone, widely expected to be announced next week, will come with a payment platform that's "one of the hallmark features of the device." Tech news site The Information reported in July that Apple has been in discussions with banks and Visa about a "mobile wallet," and Bloomberg added over the weekend that in addition to Visa, MasterCard and American Express will be on board.

Apple's iPod and iPhone already come with Passbook, an application that stores coupons, gift cards and tickets. And you can of course pay for music, movies and apps either by using the phone's fingerprint sensor (on the iPhone 5S) or by entering your password. But the company doesn't yet offer a way for you to buy actual things in the real world.

"I think this really could change the way payments are done," said John Haro, the chief technology officer of Vibes, a Chicago-based mobile marketing company that works with Apple's Passbook and Google Wallet, Google's mobile payments product.

Reports of Apple's mobile wallet come at a time when technology giants like Amazon, Facebook, Paypal and Google, as well as a host of upstarts like Square, are working to crack the mobile payments code -- that is, using your phone, instead of a credit card or cash, to buy everyday items.

There's a lot at stake: Forrester, the research firm, expects that U.S. consumers will spend more than $90 billion per year using mobile payment systems by 2017.

If Apple can tackle mobile payments, it could not only get a piece of that pie, but, more importantly, also get people to keep buying iPhones. As Business Insider's Jay Yarow pointed out earlier this year, Apple is "the iPhone company" -- over 50 percent of Apple's revenue in recent quarters has come from iPhone sales.

Today, the majority of American adults have smartphones, and even smartphones that are two years old still work really well. That means Apple needs to continue to innovate in order to get people to keep shelling out hundreds of dollars for the latest model. Creating a compelling payments platform could do that, said Haro.

"They're going to want the iPhone 6 because it's going to start to actually replace their wallet," Haro said.

Tim Cook, Apple's CEO, has himself said that the company is "intrigued with" the idea of mobile payments. "That was one of the thoughts behind Touch ID," he told investors in January, referring to the fingerprint sensor on the iPhone 5S. "But we’re not limiting ourselves just to that … you can tell by looking at the demographics of our customers and the amount of commerce that goes through iOS devices versus the competition that it’s a big opportunity on the platform."

The ability to use your phone as your wallet has been around for years. But apart from a few exceptions -- Starbucks has seen great success with its mobile app -- the experience hasn't caught on in the U.S. Paying at certain stores requires you to tap your phone -- and only certain phones work -- to a piece of hardware on the register, while paying at others requires scanning a code that appears on your phone's screen. It's confusing, and brick and mortar stores have to invest in expensive equipment to facilitate a transaction from your smartphone. Another big challenge is the simplicity of the alternative: Swiping a piece of plastic or paying with cash is pretty darn easy.

That's why most of us still leave home with cash and credit cards each day instead of relying on our smartphones and their short battery lives to make purchases.

But if one company can make a cumbersome, unwieldy experience consumer-friendly, it'd be Apple.

"Apple is known for taking existing experiences (listening to music, talking on the phone, printing a boarding pass, gaming, and many others) and making them much, much better," Denée Carrington, a senior analyst at Forrester who specializes in mobile payments, wrote in an email to The Huffington Post. "More elegant, more streamlined, easier, faster, more fun … simply better. This is what I would expect Apple to do for mobile payments and commerce."

Because cash and plastic are so easy already, Apple needs to provide people with more than just an alternative way to pay for something in order for it to be successful.

These could be as simple as receipts delivered and stored on your phone, having the phone keep track of and categorize purchases, or giving some sort of loyalty benefits that you wouldn't get when using cash or plastic, said Vibes' Haro.

"Give me a reason to pull my phone out," he said. "That's what it's all about."

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