Expert comment: The absence of NFC on the iPhone 5

No NFC

Last week Apple unveiled its iPhone 5 without NFC technology. Experts within the fields of mobile payments are now discussing what the omission of NFC capabilities in the new device means for Apple and the mobile sector moving forward.

First Data, the payments provider behind the technology for the Google Wallet, believes that the idea of an NFC enabled iPhone was just media hype. To get NFC on the consumer wish list, far more work is needed to make the solution attractive to the masses.

The omission of NFC in this week’s much hyped launch of the iPhone 5 has come as no great surprise. While other device manufactures have started down this path I expect Apple will monitor how the use of the passbook functionality in iOS6 evolves before committing to an NFC deployment,” says Jon Rutter, director of product management at First Data Mobile Solutions. “It is of course possible that Apple will introduce NFC in the next version if the market evolution continues, however until Apple is convinced NFC will sell more iPhones or make it compelling to buy other Apple products this will not be a priority.”

Rutter believes that NFC enabled mobile payments must evolve to a level where they are able to offer something more than cash or credit and debit cards before becoming mainstream. At present there is more emphasis on how to deploy an open solution rather than encouraging NFC usage.

If we take the iPhone 5 launch at face value – increased screen size, aesthetics and camera functionality – we tick all the primary consumer-need boxes,” he said. “In order to get NFC technology, and indeed mobile payments, on the consumer wish list companies operating in the NFC space now need to work even harder to make the solution more desirable to the masses. This can only be a good thing as it will drive and encourage innovation in payments over the coming years.”

Although Rutter believes that incorporating NFC technology into the new iPhone would have been encouraging, its omission should not obstruct its uptake.

Miles Quitmann, MD of Proxama claims that by omitting NFC from its new device, Apple could be at a distinct disadvantage when it comes to competing with its rivals.

The vast investment in NFC mobile contactless payments and services is not going to wane. And with the NFC-enabled Android, Windows 8 and RIM handsets dominating the smartphone market are we going to see clear water emerge between them and the iPhone? NFC is going to progress at a pace without Apple. This could be Apple’s loss,” he said.

Global brands such as MasterCard, Visa, Barclaycard, Orange and Google have committed, and will continue to commit. Millions of dollars on developing NFC capabilities. With Apple’s eschewing of NFC, the other major brands now have a real opportunity to differentiate their offering and challenge the mantle for leadership in the innovation race.”

“Contactless terminals are being deployed across the retail industry as we speak in readiness for mobile contactless payments. Apple’s Phil Schiller stated, “Passbook does the kinds of things customers need today”, clearly leaving the door wide open for when the NFC market has evolved further.”

Proxama’s MD also points out that Apple’s decision is also going to have a significant impact on its customers, such as being alienated from marketing campaigns using NFC tags.

Apple is taking a different route with mobile contactless payments at the moment and that’s fine but it does mean that iPhone users will miss out on one of the other big benefits of NFC which is the ability to interact with marketing campaigns that use NFC tags embedded in posters and product packaging. We believe that it will be this sort of activity that will initially drive the use and demand for NFC services before payments take off as mainstream,” Quitmann said.

Like Rutter, James Richards, VP Mobile, Intelligent Environments, believes that mass adoption of m-payments is still a couple of years away.

The reality is that we’re still 2-3 years away from mass adoption of mobile payments, 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 roll-out of an NFC offering for such a massive institution is a huge step, and needs to be integrated with existing offerings effectively,” he said.

Of course, Apple is already making a stance in the world of mobile wallets. The Passbook capability in iOS6 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. With 400 million iTunes account holders, Apple has access to a massive audience to leverage for payments services, but the challenge will be taking this beyond a closed-loop mechanism to 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.”

Echoing the thoughts of Quitmann, Richards states that Apple’s device may have a battle on its hands against its rivals.

In 6 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,” he said.

It is clear that those within the industry believe that it would have been promising for Apple to have introduced its iPhone 5 with NFC technology; however its omission is not a complete loss. There are still mobile phone providers that offer the technology and it could be Apple that suffers in the long run, and not the mobile payments industry.

 

 

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