Has Apple Signalled the Demise of NFC?

Martin Cox
Martin Cox - Global Head of Sales
13 September 2012
Iphone

After months of speculation, Apple has announced that the iPhone 5 does not support near field communication (NFC). Is this the beginning of the end for the technology?

Over recent years, banks and other service providers have debated the rise and adoption of NFC technology, with particular reference to what Apple is doing. A pioneer in smart phone technology, Apple is perceived by many to hold the key to mass market adoption, with the potential to shape consumer preferences and influence the direction of the industry. So, is Apple’s reluctance to embrace NFC a good enough reason for others to stay away?

Apple has collected some interesting NFC related patents. It also holds the card details of millions of consumers via its iTunes store, and has a device that commands a level of adoration amongst users that is unequalled by any of its rivals. So why not leverage these assets to create an iWallet, similar to the Google Wallet, for example? In my view, Apple must not currently see mobile payments, or other NFC-based services, as enough of a game changer to warrant a change of course, especially given the costs involved.

iphone_nfc

For Google, advertising seems to be the long-term goal, which perhaps helps to justify the scale of its initial investment. This is not the same for Apple, however. Apple could partner with banks for example, but in the past it has preferred to acquire assets and deliver a proprietary ‘Apple’ solution. Despite its market strength, Apple may feel that competing with – and potentially alienating – its primary device buying clients (the carriers or mobile network operators), is not a smart move. The potential gains for Apple are simply not clear enough yet.

But will Apple ignore NFC forever? I doubt it. Its assets are unlikely to diminish, while payment models will evolve and other uses for NFC, loyalty schemes for example, will mature. I therefore believe that we will see Apple adopt NFC at some point in the future.

Should Apple’s current disinterest in NFC be a reason for other players to hold back? Of course not. If anything, this is an opportunity for other players to get one step ahead of the ‘great innovator’, by bringing their own NFC-based products to market. The current contactless payment EMV infrastructure provides a great platform for banks and payment service providers to develop mobile NFC payment applications on a global scale, especially now that the US also looks set to migrate to chip and PIN.

Successful implementation, however, can only be achieved with clear communication between service providers, mobile network operators and handset manufacturers. It will be vital therefore for issuers to ensure that trusted service management (TSM) plays a central role in early stage product development, supporting the initial delivery and continued management of the NFC services that result.

No NFC in the iPhone 5, so what? It’s not the end of NFC and it’s a very poor reason for issuers to stand aside and let other more agile competitors invade their market.