Will NFC survive Apple’s iPhone 5 decision?

Well, September has been another big month for mobile technology with the big release of the new Apple iPhone 5.  After months of rumours about what it would and wouldn’t contain, it all became clear on the 12th with the Big Launch event and more so on the 21st when the iPhone 5 actually went on sale and people could wait in line again to try it out for themselves.  Except for the new iOS 6 Apple Maps application replacing Google Maps, the feedback on the phone and iOS 6 has largely been very positive (and maps will definitely get better, Google has had a 7 year head start in mapping).

It was very interesting that Apple chose not to release NFC (Near Field Communication for mobile payments) with this version of the iPhone (see this post for more on this).  With the sheer number of patents Apple has that rely on NFC for payments, for shopping applications and for data transfer, you would have to believe that Apple have chosen to wait and see rather than completely abandon the technology.  It will also have something to do with the fact that in the USA, up until now, there hasn’t been much of a mandated push to replace the existing mag stripe payment terminals in millions of retail outlets, so there just wasn’t the critical mass of terminals capable of reading the NFC chip out in the stores.  However faced with increased fraud risks, the Credit Card companies have now started the push for EMV (Chip & Pin) in the US as well – a little later than the rest of the world, but still, it’s the US – the biggest market.  Most of these new EMV payment terminals will also come with Contactless readers as well which are capable of reading the NFC chip.

Apple has also just released their Passbook app in iOS 6 which creates a wallet on the phone to store Discount Coupons, Loyalty Cards, Gift Cards, Airline boarding passes and Concert Tickets – anything that has a barcode or 2D QR Code that can be scanned at Point of Sale.  Apple would also be adopting the wait and see attitude to Passbook, given that app developers now have to update their apps to support the new features and capabilities of Passbook.  However early adopters in retail in the USA include Sephora with more than 20,000 downloads of their “Beauty Insider” card only 2 days after iOS 6 was launched (see here for the Sephora link), and Starbucks, who will add support for their Starbucks Card by the end of this month.  Apple will be waiting to see how various retailers choose to support Passbook before inevitably adding mobile payment support to Passbook.

This will give others the opportunity to get a bit of a head start in mobile payments and test the US waters.  Google has already made good progress with Version 2 of the Google Wallet, now with multiple Credit Card support and a number of iOS Passbook-like features supporting Coupons and Loyalty Cards but still relying on the phones NFC capability for payment.  PayPal Here for payments at Point of Sale is starting to gain traction with major retailers after Home Depot, Abercrombie & Fitch, JC Penney, Foot Locker, Office Depot, Toys R Us and others joined up, not requiring NFC for payment.  Square’s “Pay with Square” app allows for payment at selected retailers with the Square POS app to pay by just saying their name (or in Starbucks by scanning a barcode) and earning rewards.

On the merchant side, PayPal, Square, iZettle and now Groupon have all come out with dongles that plug into the phones audio socket and accept card swipes for payment – with new entrants appearing in this space every second week.  What is really required however, is the security offered by EMV and Contactless payments.  That is where the traditional payment terminal manufacturers like Ingenico and Verifone have come out with secure payment add-on devices supporting EMV that work with the iPhone and iPad for a true pay anywhere capability.

Finally, the key benefit of NFC that seems to have been overlooked by the people who have prematurely announced that it is dead, is that it will still ride on the back of the existing payments infrastructure (networks, terminals, systems) that have been put in place over the last 30 years by the banks, credit card companies and payment networks.

However, with over 435 Million (that’s right 435 Million) iTunes user accounts globally all with payment card details, Apple still holds a huge trump card in one click mobile payments.  Still betting it will be with NFC and it will make use of Passbook.  It is now all about the timing.

Apple missed a golden opportunity to dominate mobile payments

Well, its over.  The long awaited launch of the Apple iPhone 5 has happened and just about everything that had been rumoured was officially released by Apple.  The iPhone 5 comes with a taller 4″ screen, 20% lighter and thinner, aluminium back, smaller 8 pin digital connector,  high speed 4G LTE network support, faster dual core A6 processor and new and improved earbuds.  Pretty much everything had been leaked before the launch so none of these features were much of a surprise.

However, the one area, that I was convinced Apple would come out with a real game changer was to include the Near Field Communication (NFC) chip and link the new iOS 6 Passbook application with mobile payments using NFC.  I was wrong!  They didn’t.  Apple VP Phil Schiller today came out with a weak statement that “Passbook does the kind of things that customers need today“.  I don’t think so!

Passbook will be great for Loyalty Cards, Gift Cards, Airline and concert tickets – anything that has a 2D barcode to scan – but that’s nowhere near mobile payments. Apple have really missed a golden opportunity to help shape the mobile payments market and take a leadership position as they did with music and iTunes.  Today Apple announced that they have 435 Million active iTunes accounts – all with current Credit Card and payment details, allowing one touch payment for iOS apps and even purchasing Apple products in selected Apple Stores.  A huge number of accounts far more than Ebay / PayPal, Amazon or Google, and a great platform for payments.

NFC is not new technology, its been around since in 2004. RFID chips have been around far longer and are out there in countless million contactless payment cards from MasterCard (PayPass) and Visa (PayWave) – already in use in contactless payments.  Apple has countless patents which include NFC including innovative patents which have the antenna imbedded in the front touch screen, and a number of patents around shopping lists and shopping applications.  So you have to believe that NFC still has to be coming from Apple.  Later.

But why wait for at least another year until the iPhone 6?  Samsung, RIM, HTC, LG and Nokia now all have phones with NFC capabilities and will be well supported with Android and Windows 8 apps alongside the now far more flexible Google Wallet V2.0.  Thanks to Visa, MasterCard and Amex contactless payment terminals are being rolled out at a fast pace.  In Australia, they are becoming far more pervasive with major Supermarkets, fuel outlets, convenience stores, chemists, fast food chains providing contactless payment terminals at Point of Sale.

Could it be that in the big US and UK markets, the contactless payment infrastructure in retail is not as pervasive?  Could it be that there hasn’t been a huge push from customers for this functionality?  Since when did Apple believe that customer demand should determine what great services and features they include in their products?  Is it more about who owns the customer relationship and how Apple could monetise the payment transaction and take their cut?  Maybe that is still what needs to be sorted out?  Today the banks, credit card companies and payment networks are taking that significant cut – and they are not about to give any of that up without a fight.

In any case Apple have missed a golden opportunity now in Mobile Payments to be the game changer and give NFC mobile payments the impetus that it needs to really get momentum.  It will come, we will just have to wait longer and probably someone else will come to dominate that space.  Who will that be?  Google, PayPal, Square – it’s anyones guess.

iPhone 5’s NFC snub will keep technology out of mainstream

Pity Apple didn’t come to the party with NFC in the iPhone 5 as that would have driven the innovation from app developers and given the mobile payment market the impetus it needs. Passbook, as useful as it will be in iOS 6, will not be enough to cover mobile payment requirements.


UPDATED: As with most of the rumors about the iPhone 5, Apple’s (s aapl) decision to forgo near field communication (NFC) for its latest smartphone proved true as well. It’s not surprising though it deals a setback to the short-range wireless technology, which is still waiting for its breakout moment.

Apple had plenty of reasons not to include NFC. With its focus on getting the device as thin and light as possible, adding an NFC chip would have been that much more of an impediment. And more likely, Apple is not convinced now is the time to adopt it. While we’re seeing NFC appear in more high-end phones, like the Galaxy S III and Nokia 920 (s nok), consumers don’t have many applications and use cases for the technology and merchants still need to make more investments in hardware to handle NFC payments.

We’ve suggested that Apple could…

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Why talk down NFC for the iPhone 5? It’s in the trough of disillusionment

Mashable came out today with another report on “9 Most believable rumours about the iPhone 5“.  Eight of them were positive new features expected on the new iPhone to be announced by Apple on September 12th, one was negative – No NFC (Near Field Communications).  This quoted the Anandtech article from a couple of weeks ago that thought that the metal back of the new iPhone would stop NFC from being included as there was no room for the antenna.  This, despite the fact that Apple was in a great position to become a major player in Mobile Payments using NFC.

But, as seen in my recent post here, Apple has a patent that allows the NFC antenna to be imbedded in the front Touchscreen – a more natural place for the NFC antenna anyway from a user perspective.  If anyone bothers to read the comments (August 31st) on that article they would also notice that this patent has also been commented on as the reason why Apple will release NFC and it will be front facing.

Why is everyone still sticking to this (false) line, that the new iPhone will not ship with NFC? Well, I think I have the answer. In August Gartner released it’s annual Hype Cycle Report for Emerging Technologies (see picture above).  The previous years Hype Cycle report had placed NFC at the peak of Inflated Expectations, but now NFC and NFC Payments had slipped down from that tipping point to the Trough of Disillusionment, with 2-5 years before it becomes generally excepted technology on the Slope of Enlightenment.

People are over the hype. NFC has been talked about for a number of years now, it had been expected in the last 2 Apple iPhones and has now been released in a number of Android phones, including the new Galaxy range from Samsung and the Blackberry from RIM.  The Google Wallet has been developed for Android phones with NFC capabilities (now in Release 2).  Visa and MasterCard and a number of large retailers have rolled out contactless payment terminals at Point of Sale.  Everything is lining up for a major change in payments technology that will come with Mobile Payments and NFC.

NFC is the Tipping Point for Mobile Payments says Gartner, who envision a Cashless World, with every transaction an electronic one  “This will provide enterprises with efficiency and traceability, and consumers with convenience and security. The technologies on the 2012 Hype Cycle that will enable parts of this scenario include NFC payment, mobile over-the-air (OTA) payment and biometric authentication methods. Related technologies will also impact the payment landscape, albeit more indirectly. These include the Internet of Things, mobile application stores and automatic content recognition. The tipping point will be surpassed when NFC payment and mobile OTA payment technologies mature.”

Nothing will give Mobile Payments a greater push up the slope, than Apple coming out with NFC included in the iPhone 5 and linked to the iOS6 Passbook application with coupons, tickets and loyalty schemes.  It’s coming, watch this space.

Will mobile payments be the death of plastic cards?

A couple of weeks ago I posted an article by Brett King (author of Banking 2.0) on the LinkedIn Mobile Payment Strategy group. The article generated a lot of interesting comment from industry players around the world that I thought would be worth sharing on this blog. The link to the article and the LinkedIn group is here.

The article’s premise was that rather than being a threat to Cash payments, Mobile Payments are more likely to result in the Death of Plastic Cards.  The recent Starbucks / Square deal demonstrated that payments can be made simpler with the use of mobile, without the fraud issues currently plaguing mag-stripe cards in particular.  Brett stated that customers will flock to adopt the new payment technology to “a much simpler, better informed payments interaction, plastic just looks dumb, insecure and outmoded.”

I agree with Brett in that disruption in payments is not going to come from the incumbents (Amex, Visa and MasterCard), but from new players like Square, PayPal and Apple – its already started and will lead to fundamental changes in the Payment Card industry, eventually leading to the “Death of Plastic”.

Generally the comments on the article agreed that Mobile Payments will be disruptive leading to significant changes for both Cards and Cash usage for payments.  Some key points that were also brought out included:

  • Apple launching the new iPhone 5 with NFC will drive a lot of the adoption of NFC based mobile payments (see my earlier post on this topic here).
  • Merchants will be the primary benefactors of the death of plastic with lower processing costs / merchant fees as new players come into the market with better value propositions (as per the Square / Starbucks deal).
  • More convenience for the consumer including the  bundling of coupons, offers, loyalty cards, receipts, etc automatically into the payment transaction and generating all the appropriate discounts.



Despite speculation Apple’s iPhone 5 will come with NFC Digital Wallet

Recently the speculation about the inclusion of Near Field Communications (NFC) in Apple’s iPhone 5 switched from “Yes it is definitely In” to “No it’s definitely Out“.  I believe there is a strong case to support Apple including NFC in the iPhone 5 based on Apple doing things a little differently.

The original speculation was driven by a photograph of a partly assembled iPhone 5 front panel with what looked very much like an NFC chip installed (see picture).  

Later, further analysis of the photographs and the iPhone 5 construction came out with the view that NFC could not be included because the metal back of the new iPhone wouldn’t allow enough room for the NFC antenna and because of power consumption concerns in conjunction with the new LTE 4G comms technology that will be in the phone.  See article here.

However, this is Apple so “Think Different“.  Apple was granted a patent in April 2011, which covers the addition of an NFC antenna to the front touch screen sensor panel, eliminating the need for a separate space consuming RFID antenna.

With the inclusion of Passbook in iOS 6, Apple has implemented the infrastructure for an iWallet (as well as loyalty, coupons, tickets).  Along with this, some 250 Million iTunes accounts all with Credit Card payment information, give Apple the ability to be a game changer yet again, this time in Payments.   All that is missing is NFC, to actually transmit the payment information at Point of Sale – it has to be there.

With the recent acquisition of AuthenTec finger print security technology, Apple also has the ability to add additional bio-metric finger print scanning security to iPhone payments. This will address a lot of the security concerns with mobile payments and further smooth the way for the introduction of mobile payments and a great customer experience.

Meanwhile, Visa, MasterCard and major retailers have been quietly rolling out Contactless payment terminals at Point of Sale globally (over 150,000 in Australia alone) putting the retail infrastructure in place for NFC payments to take off.  Watch this space.

All this, even without the recent moves that the competition (Google Wallet, ISIS, Square, PayPal) are making in mobile payments, means that Apple must move now or risk loosing the advantage in what will be a huge market.  Hence, NFC must be there in the iPhone 5.

Contactless payment here to stay

Coles Supermarkets today announced that they had finally completed the rollout of Contactless Payments across 750 Supermarkets adding another 14,000 terminals to the MasterCard PayPass network that now numbers over 100,000 terminals across Australia. They join 7-Eleven, McDonalds, Bunnings, Dymocks, Australia Post, IGA Supermarkets, Chemists and numerous other retailers gearing up with contactless (tap and go) capability that can shave over 25% of the time off the payment process. Cabcharge has also rolled out over 20,000 contactless terminals in taxis and recently hit the 2 Million contactless payment transaction mark.

7-Eleven, one of the early adopters noted that the payment process can be cut from 35 seconds for a mag stripe / pin entry to 4-6 seconds with contactless, a significant time saver. There have been some consumer security concerns raised (as no PIN is required), but as the transactions are limited to low value (currently under $35) and both Visa and MasterCard have clearly stated that card holders will not be responsible for fraudulent use of their cards – this should not be an issue in the longer run.

A recent Deloitte study stated that 80% of of the total Australian cash transactions are currently under $35 amounting to some $470 Million a day moving through the Australian economy – significant numbers and significant time savings if these switch to contactless.

Consumers will get to love the convenience and speed of payment afforded by contactless and as the number of contactless cards issued by banks increase, the usage and take up will be much wider reducing the use of cash significantly. Currently it is estimated that usage of contactless cards has risen from 7% of the total population last year to over 14% this year with card ownership up to 35%.

Having this extensive contacless infrastructure in place in place puts Australia in a great position with the release of the new iPhone 5 scheduled for late September that is almost certainly going to come out with a Near Field Communication (NFC) chip that will also be able to be used with contactless terminals for tap and go payment. Westpac has just started a pilot program for NFC equipped Android phones with the Google Wallet – which will allow customers to tap their phone instead of their card.

Apple iPhone 5 mobile payment wild card

The new iPhone 5 with iOS 6 is due to be released in September.  Historically Apple has set the trends in Smart Phones which others have followed, but this time around the iPhone 5 will need to respond to the challenge laid down by the Android phones some of which already have Near Field Communications (NFC) payment capabilities.  Rumours are rife that Apple will integrate NFC with the new iOS 6 Passbook iWallet, giving Apple the ability to leverage markets such as mobile payments, ticketing, coupons, loyalty programs and secure access.

It is estimated that Apple has over 250 Million active registered iTunes accounts each with valid Credit Card details to allow for app purchases, which would give Apple a significant advantage in the mobile payments race making Apple the Wild Card in the mobile payments pack.

See the full article here.