Apple to Launch Pilot Program For Merchant Partnership

Apple will be launching a pilot program to develop partnerships with merchants, including retailers, according to multiple sources with knowledge of the program. The program may be related to Apple launching a loyalty/rewards program.

Rumors about Apple making a play for a loyalty rewards company heated up after Bloomberg reported that loyalty rewards company Concur was courting suitors for a sale. A source recently confirmed to Bank Innovation that IHG International, the global hotel chain, was in talks with Apple to develop a partnership on a loyalty program.

Sources close to Apple say the company has just started hiring for this division, and that, before the recent high-profile iCloud hack, the plan was to announce the pilot on Tuesday along with Apple’s other announcements. That very well may happen, or the announcement could be postponed until a later date — when more deals are in place and the mainstream media moves on from the iCloud cyberattack. Since Apple’s hiring for positions for this program now, but we don’t expect this program to be fully ready in the near future.

Based on Bank Innovation’s analysis of jobs posted to the Apple job page earlier this month, it seems like the pilot program is associated with iTunes. There’s been much talk over the past year about Apple’s potential in the payments sector, in which it could leverage the ballooning number of credit cards on file through Apple’s iTunes Store. At last count, Apple had put the figure at around 800 million, though analysts say that the figure could be close to a billion now.

Apple is looking to hire a senior worldwide partner marketing manager for iTunes, who will be tasked to “develop digital and physical assets, programs and training materials to deploy across external partners in the U.S. and other regions.” Among other tasks, this person will work with the iTunes business, product, and engineering teams to “define requirements to create marketing briefs focused on driving customer adoption of existing and new features.” The position also requires a “deep knowledge of the retail landscape from both a physical and digital perspective” and “experience working with external agencies and vendors to consistently deliver against firm deadlines.”

While retailers will be part of the program, it may extend to other types of companies as well. A different job posting make no references to retailers, but refer to partnerships and features measured by customer usage. A posting for a senior manager for business development position within iTunes was also listed on the Apple job page. According to the post, the responsibility for the position will be to “develop partnerships and strategic alliances with external partners in the U.S. and other key regions. Partnerships will be focused on driving adoption of existing and new features, measured by customer usage.” Banks and merchants are betting that by adopting the iWallet, they’ll gain access to Apple’s valuable iOS user base, avid spenders who statistically spend more than Android users. Making it easier to pay benefits the banks and merchants too, since more volume means more transactions fees.

An Apple Rewards Program?

Experts and high level executives in the financial services industry who have spoken to Bank Innovation anonymously think that if Apple were to launch a payments system smartly — and by having the clout and foresight to work with the biggest financial institutions, it certainly looks like the company is doing so — Apple will need to have an exclusive feature in the iWallet. (These same experts think that it makes sense to extend the program beyond retailers.)

There are a lot of mobile wallets out there — Google Wallet, Softcard (the artist formerly known as Isis), and thats not even mentioning the plethora of startups and bank-driven efforts. Since merchants will need to have NFC, they’ll be able to accept payments from any mobile wallet provider and any NFC-ready device. “All of these wallets will eventually be frictionless,” an executive at one financial institution told Bank Innovation anonymously. “Apple needs to add a value to the iWallet.”

The problem is determining what this pilot program actually is — it doesn’t look like it has much to do with merchants “accepting” payments. This is why MCX partners, like CVS and Walgreens, as Re/Code reported earlier, can “accept” payments but not be an Apple partner. A source tells Bank Innovation that much of the exclusivity around the MCX deals with merchants had to do with the marketing. CVS and other MCX partners, in other words, would not be partners with Apple.

All of this lines up with Apple developing a loyalty rewards program. The thinking is that the merchants, who are presumably unhappy with Apple’s deal with the issuers, were appeased by Apple with the promise of more volume. There is as yet no word on how broad this loyalty reward program will be. Experts on the financial services side expect a watered down version to be available when the pilot launches. Apple may use the iTunes credit cards on file as a “default” card, and develop an e-commerce solution to pay with iTunes. Hypothetically, those who pay with iTunes (or the iPhone 6 and iWatch) will be eligible for the loyalty program.

Correction: We referred to IHG International as “IGH.” The post has been corrected and updated accordingly.