Inside Apple's secret plan to kill the cash register

Apple has already built technology into iPhones and iPads to make retail stores work like the Apple Store -- without cash registers

If you've ever been to a store, you know the drill: Browse the merchandise, pick something, carry it to the checkout counter, maybe wait in line, pay, then walk out with your purchases and a receipt.

Whether it's a clothing store, a grocery store, or a coffee shop, you're likely to find a big counter with a cash register on it, and a person operating that cash register on the other side. You go to them; they don't come to you. Why?

[ InfoWorld's Pete Babb tours cool uses for NFC beyond payments. And Galen Gruman explains why mobile payments won't develop in the way you might think. | Stay ahead of the key tech business news with InfoWorld's Today's Headlines: First Look newsletter. | Read Bill Snyder's Tech's Bottom Line blog for what the key business trends mean to you. ]

An American saloon owner named James Ritty invented the cash register in 1879. Since then, all cash registers have shared the characteristics of bigness, heaviness, and bulkiness -- and have required the old walk-up-to-the-counter behavior to buy things.

One notable exception is your local Apple Store. There are no cash registers. If you want to buy something, you flag down some kid wearing a brightly colored T-shirt and hand over your credit card. The kid scans the item's bar code with a specially outfitted iPhone or iPad, swipes your credit card, and emails you the receipt. The transaction can happen anywhere in the store.

Apple, apparently, thinks the whole process for buying things in retail stores is dumb. The big counter you have to walk up to? The giant machine for registering the transaction? The paper receipt? Dumb. Dumb. Dumb.

And it has a point. Cash registers are obsolete and unnecessary.

So why would Apple's hotly anticipated iWallet system require a cash register?

It won't, if one analyst has it right. More on that below.

The new world of contactless payments

When people talk about the future of digital wallets -- electronic smartphone-based replacements for credit cards, debit cards, and cash -- you're likely to hear the initials NFC in the same breath. NFC (near-field communications) is a set of technologies that makes it possible to pay for purchases using smartphones, among other things.

The idea is that all smartphones will contain NFC chips that let you use your phone as a credit card. To make a transaction, you pass your smartphone over or near a special gadget that's hooked up to a cash register as an equivalent to swiping a credit card.

Many Android devices and some BlackBerry smartphones already have NFC chips. A few retail stores use NFC equipment. (As I write this, I'm sitting in a shop that's part of the Peet's Coffee & Tea chain. There's an NFC device near the register at the checkout counter, and there's a little sign specifying Google Wallet-based payments.)

But everybody's been waiting for the other 900-pound handset gorilla -- Apple -- to ship iPhones with NFC chips in them to kick-start the contactless-payment revolution.

How Apple will kill the cash register

The point-of-sale industry (made up of companies that make and sell cash registers and the software and networked systems that support them) is in crisis. Apple's iPad is growing as an alternative to big, heavy cash registers and their hard-to-learn systems and interfaces.

Small retail businesses are opening their doors without ever buying a cash register. Instead, they're using iPads that use Square technology, or something similar, to handle the main functions of cash registers -- at a fraction of the cost.

Yet iPad-based point-of-sale systems don't involve digital wallets. The payment medium is still an old-and-busted credit card.

Apple's iWallet digital wallet will eliminate the need for both the cash register and the credit card. Why? Because it will use Bluetooth, rather than NFC, according to Pablo Saez Gil, a retail industry analyst at ResearchFarm.

Apple's solution is already deployed

I believe the new iPad's best feature is Bluetooth 4.0. Apple, which is notorious for being slow to market with brand-new technologies, was conspicuously early when it came to Bluetooth 4.0. At the time they shipped, the iPhone 4S and the iPad were the only major phone and tablet models to support Bluetooth 4.0.

Why so aggressive with Bluetooth 4.0, Apple?

Gil's answer: Bluetooth 4.0 is Apple's answer to the digital wallet and an alternative to NFC.

For starters, Bluetooth can go into ultra-low-energy mode, passively making connections and transferring the information necessary to conduct a financial transaction. And it can make those connections at much greater distances than NFC can -- up to 160 feet -- eliminating the need for a customer to go to a checkout counter to use an NFC reader.

Everyone has been waiting for Apple to announce the beginnings of a digital wallet system, followed by years of development, rollout and evolutionary acceptance. But the Bluetooth 4.0 theory means that Apple could announce iWallet software -- an app, backed by a new service from Apple -- and the program would come into being overnight.

No doubt payment would happen through iTunes accounts as detailed in Apple's iWallet patent, and Apple would receive a micropayment with every transaction.

Apple has built Bluetooth 4.0 into every computer, tablet, and smartphone it has shipped since the middle of 2011, representing millions of users. The world does not have to wait for a gradual NFC rollout. The underlying wireless technology has already been deployed at scale.

Note that Apple has not announced a Bluetooth 4.0 digital wallet system. But after considering Gil's analysis, I believe that the introduction of such a system would explain why Apple rolled out Bluetooth 4.0 so aggressively. It would also be in line with Apple's obvious contempt for cash registers, and it would greatly enhance Apple's effort to take over retail point-of-sale systems with the iPad.

Bluetooth 4.0 would enable retail stores to roll out instant iWallet point-of-sale systems that use iPads or Apple desktops or laptops. These systems would eliminate the need for iPhone owners to go to a checkout counter or use a credit card.

Stores using cash registers and Google Wallet could also cheaply and easily offer Bluetooth 4.0 iWallet solutions as well. That would give iPhone users the retail equivalent of the airlines' "business class" status; unlike users of credit cards or Google Wallet, they wouldn't have to wait in line or even go anywhere near a checkout counter to pay for their purchases.

In restaurants, credit card transactions would continue to require servers to make two trips between the table and the cash register -- one to carry the card to the register for approval, and the other to punch in the tip and file the signed credit card slip.

For its part, Google Wallet would require just one trip -- for the waiter to bring an NFC device to the table. But Apple iWallet users wouldn't need the server at all: They'd just pay on the smartphone and go.

If Bluetooth 4.0 makes it possible for Apple to simplify restaurant and retail payments to that extent, users would have an incentive to switch to iPhones, restaurateurs and store owners would be inclined to switch to iPads, and financial services companies, including credit card companies, would be willing to play ball with Apple.

It would also give Google an incentive to embrace Bluetooth 4.0 payments as well. Apple would be crazy not do to it.

If a Bluetooth 4.0-based Apple iWallet is a success, it could be the beginning of the end for the venerable cash register.

Mike Elgan writes about technology and tech culture. You can contact Mike and learn more about him at Elgan.com, or subscribe to his free email newsletter, Mike's List. You can also see more articles by Mike Elgan on Computerworld.com.

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This story, "Inside Apple's secret plan to kill the cash register" was originally published by Computerworld .

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