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Innovation in Financial Services

Innovation in Financial Services

A discussion of trends in innovation management within financial institutions, and the key processes, technology and cultural shifts driving innovation.

Apple and the Future of NFC

12 February 2013  |  6604 views  |  1

With the release last year of the iPhone5, Apple decided to pass on NFC, at least for now. Instead, they included Passbook, an app to store electronic coupons, vouchers, and boarding passes, which, using barcodes or QR codes, provide services from the likes of Starbucks, United Airlines, Ticketmaster, or Target. So why did Apple decide to not go for NFC? A couple months on from the release of the latest iPhone, it still isn’t clear.

According to market research, Global NFC-enabled phones are estimated to reach 300 million this year and double that by 2016. Obviously, the other handset makers continue to bet on this technology. NFC is also still being actively promoted by Visa and MasterCard as the payment method of the future. MasterCard PayPass and Visa payWave are gaining a foothold across the world, with Asia taking the lead in the rollout. For example, in Australia, more than one in ten purchases of under $100 is made with MasterCard’s PayPass.

In an effort to get its UK customers accustomed to using their phones for contactless payments, Barclays released PayTag, a NFC sticker which links to the customer’s traditional credit card account. These adhere to the back of any mobile phone. If Apple won’t come to NFC, then let NFC come (or stick) to Apple.

While NFC-enabled smartphones are not a necessity for the growth of contactless payments, they are still considered an important trigger to make them commonplace. Apple’s decision to not support NFC has definitely cooled consumer and retailer interest and can be considered a blow to the near future of the technology.

Some analysts see Apple’s move in line with their past behaviour: they often are not first movers into a new technology (the iPod was not the first mp3 player nor the iPhone the first smart phone). Apple may want to wait until NFC coverage in stores is wide enough so that they can guarantee that their solution will be well used by its users; perhaps Apple is just holding off until it knows it can get it right.

Apple holds a patent for “iWallet” which undoubtedly will be a key iPhone app in the future. However, iWallet may not use NFC, but instead an alternative software-based technology, such as that used in Passbook. (Note that Apple also holds a patent for a new technology that uses biometric capability to securely unlock devices with fingertips, eyes, or face. This may be a key feature in their payment solution.)

Currently, there are a lot of different modes of mobile payments, from software-based solutions like in-app payments and virtual credit cards to hardware-based solutions like NFC. Moreover, there are numerous players in the market which extend far beyond the banks and include telcos, software companies, credit card companies, retailers, and others. In the mid-term, variety will continue to rule. The mobile payment pie is huge (estimated at $800 billion in 2016) and everyone will continue to scramble to get its slice.

We’ll just have to wait for the next iPhone to see what strategy Apple has to grab its piece.

Karl Rieder, Delivery Manager, GFT

TagsMobile & onlinePayments

Comments: (2)

A Finextra member
A Finextra member | 12 February, 2013, 12:32

If NFC can be done with just a sticker, what brand differentiation can Apple bring to bear?

Apple entered the phone market on their terms, not the networks'. NFC puts the banks in the dominant position, so Apple will want to bypass them. This is likely to be via an increase in Passbook functionality and greater leveraging of the card details they hold in iTunes. 

And about those stickers - I hope they come with strong glue!

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Matt Scott
Matt Scott - RenovITe Technologies Inc - London | 12 February, 2013, 12:51 The stickers are nothing new - they were being deployed in Turkey in 2008/2009. With regards to Apple - I am almost certain they must have something in development given the level of recruitment from the Cards and Payments industry. With so many active iTunes Accounts - one has to wonder whether they will try to leverage some of their existing Payments Infrastructure for something new....
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