The Apple iWallet: Why The iPhone 5 Killer Feature is Mobile Payments

Mobile payments are coming. The reality is, cash and credit card transactions are a wholly inefficient means of commerce compared to organized, trackable, digital payments; the problem is, nobody has a solution safe and sensible enough where people would be willing to throw their wallets away. Sure, there are mobile payments efforts like Jack Dorsey's Square, or Intuit GoPayment, but people are wary to jump into their solutions with both feet. Exchanging a bulky wallet for a sleek smartphone is a great idea, but there just isn't a solution that truly makes sense. Until now.

On March 6, the U.S. Patent and Trademark Office granted Apple a patent for a new technology called iWallet, which is a digital platform that gives the user complete control over their subsidiary financial accounts directly on their iPhone, and also leverages Near-Field Communication (NFC) technology to complete credit card transactions on the phone as well. On Tuesday, more patents were granted to Apple in relation to the iWallet technology, including security measures that aim to keep financial information safe, and the app in iTunes that will house these features. In all likelihood, this is Apple's mobile payments solution intended for its next-generation iPhone, presumably called iPhone 5.

People will say, But I have a wallet. I don't need my phone to be my wallet. I'd also bet that 10 years ago, they didn't think they needed their phone to also be a music player, or a gaming device, or a Web surfing device. But now that it is, people can't live without any of it. Apple and Android have successfully killed the simple cell phone; now, it's a race to see who can pack the most features into a device that can fit in your pocket.

Apple breaks down the iWallet like this: Credit card transactions happen all the time, whether or not the cardholder is present. There's a lesser chance of fraud when the cardholder is present, but unfortunately, the cardholder can't be present all the time. Apple's solution, the iWallet, aims to provide real-time authorization for transactions where the cardholder is not present, or remote. However, unlike transactions over the Internet, Apple promises its service to be highly secure and reliable.

Since there are so many components to the iWallet, we're going to break them down and explain each of them.

Credit Card Profiles

When a user visits their profile in iWallet, they will see their available credit cards attached and be able to open up each individual card's profile. Within the profile, users can view their monthly statements, read messages and alerts from the bank, and even adjust preferences or add additional cards. Within preferences, the owners can set payment alerts for days in advance, or let the user know when their balance is approaching the limit.

Parental Controls

Parents can be pleased to know that thanks to the iWallet, their children will be able to use their phones as digital credit cards, and thankfully, parents can set the restrictions. Under the parental controls within preferences, parents can set spending limits -- either per transaction or overall -- and can even restrict which merchants a child can purchase from. It's all done digitally in the iWallet.

When a child exceeds his or her monetary limit -- set by the parent, of course -- the transaction can then request an authorization from the parent (via their iPhone), or simply decline the request. It's extremely easy, and it gives total control to the parent to let them manage their family funds.

Authorization Requests

If you have a child or teenager that plans on making a lot of purchases, you as a parent may be receiving a LOT of iWallet Authorization Requests. To filter through all of these, Apple gives the cardholder several options, including automatic authorization for all missed requests, or just certain requests under a specific value, or just requests with a specific merchant, like Barnes & Noble or Apple.

Flagging Fraudulent Purchases

When a cardholder finds fraudulent activity on their account, it's always best to contact the authorities right away. Unfortunately, however, most people don't know their card has been stolen until they receive their monthly billing statements. The iWallet aims to give the user greater awareness of their transactions and facilitate contact with authorities when fradulent activity is suspected or found.

In iWallet, users will have the ability to flag any purchase, likely in the same way a user flags an email. When a purchase has been flagged, the cardholder's bank is immediately notified, and the bank will quickly get in touch with the cardholder to discuss the situation further and offer instructions. While there's no easy way to prevent theft, iWallet provides a great way to pounce on it as soon as it's happened and nip it in the bud.

The iTunes Hub

Since users don't want to handle all of their financial transactions on a tiny 3.5-inch iPhone screen, Apple's patent involves a new tab in iTunes called MobilePay, which lets credit card owners see all of the credit cards in iWallet at a glance. Similar to the iPhone version, users can monitor their statements, bank messages, and recent purchases, and alerts and parental controls can also be set here too.

MobilePay will be an option you can toggle within iTunes once the platform becomes available. When you set up MobilePay, iTunes will ask cardholders to submit their credit card information, including their card number, name, address, and eligibility. At that point, you will be able to sync your credit card on iTunes to your iPhone, which will automatically push all of your data to your phone.

A New Mystery Gesture

Apple wants to make its payments platform as safe and secure as possible, so the company has reportedly added another way for users to approve their purchases. Instead of filling out a simple CAPTCHA, iWallet will reportedly feature a brand new gesture, known currently only as a Motion Based Payment Confirmation. One could only guess what the gesture will be. My money's on drawing a check mark with your finger.

Other Rumored Features in the iPhone 5

The next-gen iPhone isn't expected to launch until later this year, but that doesn't mean we can't daydream about what's inside. While little is truly known about the next iPhone, Apple loves to surprise fans with bold new features, and a number of recent reports and granted patents offer hints as to what we'll see come September or October.

LTE

The new iPad released on March 16 was the first iOS device to feature bands for the high-speed 4G LTE network. There aren't many sure-things when it comes to Apple, but it's a near-certainty that the next iPhone will similarly receive LTE capabilities.

LTE, or Long-Term Evolution, features significantly higher download and upload speeds compared to 3G technologies, but the current implementations of LTE in phones appear to cause very short battery life, which is a major complaint by users. If Apple wanted LTE in the iPhone 4S, it would have been forced to increase the phone's thickness to accommodate a larger circuit board and a bigger battery. Apple CEO Tim Cook, in a company earnings conference call in April 2011, said first-generation LTE chipsets force a lot of design compromises.

The iPhone 4 PCB [printed circuit board] is already incredibly small, not leaving any room for an extra chip to enable LTE without shrinking the size of the battery, said Anand Shimpi, a chip expert and CEO of Anandtech.

Fortunately, Qualcomm recently unveiled the fifth iteration of its new chip, which supports TD-SCDMA, TD-LTE, HSPA+, EV-DO, embedded GPS, and LTE on TDD and FDD networks worldwide. The chip works with Android and Windows 8 devices, but by targeting so many different carriers, there's a high degree of likelihood that this will be the same chip inside the iPhone 5.

New Shape and Form

As of January, Apple was reportedly gearing up to begin production on the iPhone 5. A source from within China's Foxconn manufacturing plant told 9 to 5 Mac that various sample iPhone 5 prototypes were floating around the floor, but there were a number of common features among the phones, including a display that measured at least 4 inches, and a longer and wider form factor that did not match that of the iPhone 4 or 4S. The sources added that all of the iPhone 5 prototypes retained the rectangular shape of the iPhone 4 and 4S, which would put to bed rumors of a thinner teardrop shape.

When many believed Apple would unveil an iPhone 5 in October, the Internet was flooded with photos of a thin, large-screen iPhone 4. The photos were widely believed to be doctored until one Chinese site discovered mold engineerings of an iPhone 4 with a noticeably larger screen. The renderings depicted an edge-to-edge design for the iPhone's screen, which looked to measure about 3.7 inches. Component industry trackers believed that the images represented Apple's wish to compete with rival devices with bigger screens.

Even though Apple released the similar-looking iPhone 4S, there's a possibility that this is what Apple had in mind for the iPhone 5, but without LTE, the iPhone 5 would not go into production anyway.

Patent: Shatter-Proof Glass

Besides the iWallet, the iPhone 5 may also include a number of the company's recently granted patents. One handy patent for the next iPhone could be Apple's crack-resistant glass solution, which places a shock mount between the glass and the body of the device that instantly inflates if the device senses it's falling, which is determined by the device's internal accelerometer. An actuator within the device then sucks in the cover glass as it accelerates to the ground, thus protecting it from damage.

Patent: Multi-Player Gaming

On March 15, the U.S. Patent and Trademark Office (PTO) published a patent application from Apple that describes a system for multi-player gaming. Similar to how the new Garageband's Jam Session feature allows groups of people to play different musical instruments together, the multiplayer gaming technology will allow groups of iPhone and iDevice users to play together, and even see the same game from different perspectives.

Believe it or not, the multiplayer game system mimics that of the Find My Friends app, in which a user's device detects other nearby devices that it recognizes as friends, and invites them to all join a common application. The unique technology also determines the relative position of those devices, so some games -- like turn-based role-playing games or card games -- can be played in a specific order.

The crux of Apple's solution determines the relative position of many devices by taking pictures of a tag, and the system monitors those shared images and decides their relative positions. Apple's technology can define a position in two or three dimensions relative to the original tag, and by transmitting a positioning matrix to the other iDevices, the information creates a comprehensive map of the devices.

Once the order is set, the users can cooperate and play with each one another as content is simultaneously broadcasted and received on the iPhone. This can work for multiple players playing the same displayed content (ex: a racing game), or multiple users playing against each other in a game (ex: a hand-to-hand fighting game like Mortal Kombat), or multiple users taking turns to play the game (like a board game or Jenga). Virtual avatars even represent one's position by displaying the avatar from a different perspective depending on the position of the player relative to the tag.

Patent: The Photographer's Timer

Apple continues to improve upon the camera infrastructure in its iPhones, but as far as camera software goes, the iPhone has remained largely unchanged. That will change if the iPhone 5 includes the patent for a new iDevice self-timer, granted on March 8, which comes with a unique twist.

Traditionally, self-timing cameras are used to take pictures of a big group, or a self-portrait. But in Apple's self-timer, the camera will know that you are the photographer that also wants to be in the picture, and the iPhone will simply wait until it detects your face to take the picture.

But what about interruptions? What happens if I get a call after I set the self-timer? Wonder no more. If you set the timer and then your phone goes off, the timer will still wait until it has detected, recognized and verified that you are the photographer and that you're in place for the photo.

Now if only Apple patented a tripod...