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Apple Inc. (AAPL): You’re Wrong About the iPhone 5S

Apple Inc. (AAPL)This year’s iPhone 5S is widely expected to include some type of fingerprint sensor, leveraging Apple Inc. (NASDAQ:AAPL)‘s acquisition of AuthenTec last year for $356 million.

Rumors up until this point have suggested that Apple is integrating a fingerprint sensor directly into the iPhone’s home button. KGI Securities analyst Ming-Chi Kuo, who boasts a strong track record with Apple Inc. (NASDAQ:AAPL) rumblings, has predicted as much. Well, a freshly public patent application shows that Apple might have something better up its sleeve.

Apple might be integrating the fingerprint sensor directly into the display itself. Integrating into the home button was already considered an important point of differentiation that rivals would have trouble matching, but integrating into the display adds a whole new level of distinction. It also allows a wider range of use cases, as third-party apps would have more ways to leverage the technology.

The patent was originally filed for in January of this year, and AuthenTec co-founder and current Apple Inc. (NASDAQ:AAPL) engineer Dale Setlak is credited as the inventor.

It’s an innovative approach that no company has attempted on this scale before. The possibility gives further credit to prior reports that Apple Inc. (NASDAQ:AAPL) is facing challenges with manufacturing yields related to fingerprint-recognition chips and LCD driver circuits. The iPhone 5 also faced early supply constraints because of display bottlenecks.

The patent application will only reinforce speculation that Apple Inc. (NASDAQ:AAPL)’s entry into the mobile payments industry is imminent. Apple is now up to 575 million active iTunes accounts with credit card data on file, and Passbook is already taking off in popularity among merchants, even without a uniform payment method.

Primary mobile rival Google Inc (NASDAQ:GOOG) is also regrouping its own payment strategy, launching a fresh round of promotions to spur developer and merchant adoption while shuttering Google Inc (NASDAQ:GOOG) Checkout, and unifying under the Google Inc (NASDAQ:GOOG) Wallet brand. The expanded Google Wallet service hopes to also put heat on eBay Inc (NASDAQ:EBAY)‘s PayPal on the broader Web. Meanwhile, PayPal is on Apple Inc. (NASDAQ:AAPL)’s side in its possible crusade to kill the password in favor of biometric security.

Tim Cook believes the mobile payments market remains in its “infancy,” so the Apple CEO has clearly put some thought into it.

The article You’re Wrong About the iPhone 5S originally appeared on and is written by Evan Niu, CFA.

Fool contributor Evan Niu, CFA, owns shares of Apple. The Motley Fool recommends Apple, eBay, and Google. The Motley Fool owns shares of Apple, eBay, and Google.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

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