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Martin Cox

Martin Cox - Rambus

Martin Cox - Rambus

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Apple’s iPhone 6 with NFC. Is it a Game Changer?

26 August 2014  |  7496 views  |  2

A new iPhone is imminent and again there is much fascination in the payments world as to whether Apple will finally join the near field communications (NFC) fray. It now appears that the iPhone 6, which is expected in September, will be the device that sees Apple enter the mobile payments market. As with all Apple launches, speculation has already begun and there are strong rumors that the device will feature NFC and an embedded secure element, but will not support host card emulation (HCE).

For years, card issuers considering a mobile strategy have asked “what about iPhone?” They have been unable to offer an NFC solution to the mobile banking customers that use Apple devices. However, those hoping that the new iPhone will offer them an opportunity to broaden their NFC product range, may be disappointed.

Apple wallet?

It appears that Apple is not only planning to bypass the mobile network operators (MNOs), but also the banks. Reports suggest that Apple will offer a payment solution with card images held in an Apple wallet. The Apple wallet will use the embedded secure element (eSE) along with the user’s payment instrument that is already linked to iTunes. If this is true, then Apple has a unique solution that does not require them to partner with either issuers or MNOs. That would mean no bank wallet, no relationship with issuers and no tie up with the telcos. Surprise, surprise Apple is apparently going to launch a solution that is focused purely on Apple.

BlackBerry & Samsung

Similar strategies have been tried before. BlackBerry has included eSEs in its devices for many years, but using them to bypass MNOs (its primary purchasers of BlackBerry hardware) would have been a risky strategy. Samsung also tried a similar path but seems to have backed off more recently as the eSE is absent in most versions of the Galaxy 5S. In both cases, the device manufacturer had a solution that could cut the MNOs out of the equation but seemingly chose not to pursue it. Apple would appear to be taking this a step further by using their iTunes card records to also circumvent the banks. Whether they will be successful remains to be seen – the iPhone has been losing market share to Android devices of late, but it will take a brave MNO to refuse to take it to market over this issue.

Future of MNOs?

There was a time when, with the SIM / trusted service manager (TSM) model, the MNOs had a potentially lucrative mobile payments market to protect.  Now, with Android’s support for HCE making a potentially fatal dent in that strategy, the threat of Apple launching a solution that also cuts them out seems much less of an issue than it may have been this time last year.

Perhaps the silver lining for the mobile payments industry is clarity. No more ‘waiting for Apple’ strategies, no more doubt that (at least for now) NFC is the communication method of choice at the point of sale (PoS) and, perhaps most importantly for Apple’s primary market in the USA, it’s a strong endorsement for the ubiquity of EMV.



Comments: (3)

A Finextra member
A Finextra member | 26 August, 2014, 13:28

Does this suggest Apple are willing to accept Unauthenticated Customer Not Present MSC/MIF payment rates?  Although this was the model mooted a few years ago I would be very surprised if this is what Apple intend to launch.  I (personally) would imagine they are adopting a more collaborative approach with launch issuing partners using eSE (I think it is a shared component with the Finger Print Secure Storage region).

I am sure all will be revealed on September 9th 2014… 


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Brett King
Brett King - Moven - New York | 26 August, 2014, 22:16

Secure element is largely redundant with Tokenization in any respect

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Martin Cox
Martin Cox - Rambus - Rotterdam | 27 August, 2014, 01:05

I don't have any inside track with Apple, I'm making assumptions based on publically available information and exactly how Apple will implement remains to be seen. (I agree, probably on Sept 9th)

Looking more generally than just at Apple, if payment credentials are stored in the SE (as in the SE/TSM 'traditional' NFC model) then I agree with Brett, tokenisation is unlikely to play a part. However, if the SE is used to provide additional on-device security in a cloud based solution, tokenisation may still be implemented.

Given that there are many assuming that Apple will use Visa's tokenisation service, it seems likely that there will be some cloud element to their solution. Will they tie up with issuers to store more than just the itunes card details and thus avoid the interchange differential? That is not only a valid discussion point but would also be an interesting commercial discussion to overhear.

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job title Strategic Product Marketing
location Rotterdam
member since 2013
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Building on a history in secure identity & payments by both card & mobile. Assisting banks & retailers to leverage opportunities that new payment technologies bring. In-app, in-aisle, HCE, NFC, PSD2,...

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