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No NFC on the iPhone 5?

Just in case you missed it ... The iPhone 5 has finally landed!! While the usual queues greeted the latest instalment of the world’s best loved smartphone, in mobile payment circles, all the talk is about what hasn’t been included rather than the array of new features that have.

The decision to omit NFC capabilities by Tim Cook et al has surprised a number of industry watchers, many who truly felt Apple would use its latest launch to give the mobile payments sector the final big push it needs to go main stream.

However, it’s no surprise that Apple made the decision it did. The reality is that the mass adoption of mobile payments is still two to three years away, and with so many companies jostling for attention in this space it’s likely Apple will wait another 12 months before including NFC in iPhone technology.

The simple reason for this comes down to the fact that when the company rolls out NFC capabilities on its smartphones, it wants to do it properly – and at a time when its devoted customers see value in NFC and will apy to upgrade to a phone which has it.

The introduction of payment technology on the level that Apple will be required to carry out is a huge step and it needs to be integrated with its existing offers to have the maximum effect for the business and its customers.  It’s going to be the strategy of slow and steady from Apple’s point of view and we’ve already seen it take the first steps, with the inclusion of Passbook on its IOS 6 platform.

The Passbook is clearly a useful wallet container for storing tickets, coupons, and offers, and it’s highly possible that for the time being this is where Apple’s payments investment will be concentrated. Already, consumers are able to store airline tickets and hotel bookings in this folder and its likely even more information and storage capability will follow in due course. What Apple does once this initial step is complete, however, will prove most interesting.

The company currently has over 400 million iTunes users and their credit or debit card information on file. This access to such a massive audience means that Apple is perfectly poised to integrate this with its Passbook facility.

When mobile payments become common place on its devices, it’s of upmost importance that Apple takes this information beyond a closed-loop mechanism and turns it into a truly useful, customer centric tool.

If Apple can solve this puzzle with the levels of innovation we have come to expect from them, it’s entirely feasible to see how consumers can use their iTunes account to pay for everyday goods and services beyond today’s media purchases - this would be a true game changer for consumer payments.

While Apple’s approach has been rightfully cautious, it’s important to remember that many of their rivals have already started making ground in the mobile payments space, with Samsung especially, making headway in this area. In six months time it will be telling to review sales of the iPhone 5 versus Samsung and Nokia’s NFC enabled phones. This will show whether consumers are ready to favour the convenience and practicalities of paying for goods with their mobile phone, or in fact, they are loyal to the Apple brand and a great looking phone with the widest range of apps.

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Comments: (2)

A Finextra member
A Finextra member 27 September, 2012, 09:48Be the first to give this comment the thumbs up 0 likes

The issue with NFC is that the problem it solves might be mis-understood.

Too often the technology is seen as the solution but the problem is not really defined. When you see NFC as very complicated way to "wirelessly" transfer a payment token (credit/debit card info) to a merchant for centralised processing you quickly realise the vast expense to get a couple of hundred bits of information from my hand to a retailer system "wirelessly" might just be over the top.

Today I can pass a significant amount of info from my mobile to a merchant "wirelessly" with no modification. Barcodes and QR codes can be generated with ease. Every phone has a screen and more retailers have bar code scanners than NFC terminals. Imagine requiring every Airline to move to NFC and add an RFID chip to every paper boarding pass and you see how ludicrous the NFC arguments are.

From a fraud angle it's also better. Sneaky thieves are unlikely to go around with barcode scanners trying to scan your phone. Unlike NFC devices that can be serendipitously scanned.

People can wishfully think that deploying a whole new technical infrastructure and waiting a generation for new devices to reach critical mass (remember we've been saying NFC is 2-3 years away for about 7 years now  http://linkd.in/NSHBRN) is the way to go. But in reality the simpler solution will generally prevail. The problem just might not need the level of technology and complexity that is being thrown at it.

While the industry NFC debate rages on I'll keep scanning my Starbucks passbook account on my iPhone (any model back to the 3GS will do) and go to the boarding gate with my BA ticket on my iPhone.

NFC advocates can wait for a new handset and a whole industry infrastructure to arrive I've heard it's just around the corner. In the mean time they might want to read Waiting for Godot. It has a plot that they might find familiar.

My bet is that Apple will never include NFC in their handsets and that this whole debate will be reminiscent of WAP, the electronic invoice and the paperless office (which were all 2-3 years away 10-20-30 years respectively).

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 28 September, 2012, 14:26Be the first to give this comment the thumbs up 0 likes

When Apple had launched Passbook using QR code a few months ago, it seemed clear that it was distancing itself from NFC. Rather than getting diverted by NFC, I actually expected iPhone5 to disrupt the QR code space by either (a) including a scanner app as part of iOS so that the current pain of having to download and install a separate app is eliminated, or (b) going one step further and making this functionality an integral part of the camera app so that scanning a QR code becomes no different from clicking a picture. I'm disappointed that neither has happened!

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