Your iPhone 5 is already your 'iWallet' while Samsung warns NFC isn't working yet

Apple [AAPL] decision not to put NFC inside the iPhone 5 is irrelevant -- not only are NFC services fragmented, but the Apple device has already become your “iWallet” thanks to third-party vendors, NFC proponents and integration with solutions such as Passbook.

[ABOVE: Nothing to do with NFC, these brand new Motorhead-approved headphones are the business. Compared to the trebly dance music-focused pans we’re used to these deliver vastly superior music playback for guitar-based rock ‘n’ roll.]

Samsung says NFC isn't happening

You don’t have to look too far for a firm to confirm that NFC is fragmented and consumers aren’t making use of it -- that’s exactly what Apple foe Samsung’s senior VP mobile communications Hankil Yoon told the NFC World Congress last month

Even on Samsung’s home turf in South Korea, NFC isn’t really happening. There’s tens of millions of NFC-equipped devices in use out there, but “use of NFC services is very low,” said Yoon. 

One example, in Korea, as you know, we started launching NFC services on Galaxy S II, Galaxy Note and Galaxy S III, so in Korea I think there are tens of millions of NFC devices already in the market. (But) consumers, they don’t know how to use it. They don’t even know they have something called NFC that they can use for transportation and mobile payment,” he explained.

There’s cheaper alternatives. In order to get the kind of point-of-sale coverage the technology needs, retailers have to climb aboard, and at present demand just isn’t there.

Samsung believes the introduction of mobile wallets has been hampered by fragmented standards and certification systems, the existence of too many vendors offering NFC systems and the different architectures of many of the competing payment systems in the space.

When it comes to NFC, we’re not just talking about a couple of conflicting standards. Samsung dreams of just having three standards to tackle. “You need to have something in common, maybe not one single standard but at most three standards,” said Yoon. “You don’t want to have a credit card service that can’t work outside your country.

[ABOVE: Samsung’s anti-iPhone ad. It features NFC which no one uses, and a touch-based media and contact info sharing system that sometimes works.]

Tough talk

That’s the reality which drove Apple to begin forging its own path with the launch of Passbook in iOS 6. Apple marketing chief Phil Schiller says the company isn’t yet convinced NFC answers a problem people actually have. “Passbook does the kinds of things customers need today,” he explained. Customers seem to agree with his assessment.

Samsung sees the Apple threat: “There are players like Apple that came up with a solution not based on NFC,” said Yoon. “That may be a good thing, but once that becomes popular and consumers start to perceive that they don’t need NFC, they just need what they have in Apple, then the (growth) of the NFC ecosystem will be delayed that much more.

We’ve looked before at the many companies already climbing aboard Apple’s Passbook bandwagon. That connection between the third parties and Passbook seems a natural start to an organic evolution toward some form of mobile device payment system in future.

That’s not to say the NFC industry is prepared to quit. Too many people have invested too much cash into creating their dream of a cashless society -- even though their vision is strongly resisted by a public unprepared to lose the flexibility of cash, particularly during a period of economic crisis.

RBS and NatWest have begun the UK introduction of TouchPay. This service relies on an iCarte iPhone case that’s equipped with an NFC chip and connects to the phone. You make payments via this system using an app on your phone. and can then use the system to make purchases at retailers including McDonald's, Pret A Manger, Subway, and EAT.

In the Czech Republic, Komerční bank is also making a limited number of the iCarte NFC attachments available for iPhone users.

Both banks hope that by enabling iPhone users to make payments using NFC they’ll be able to promote the standard. The banks aren’t a closed shop, the Bank of America is testing an image-based mobile payments system which could conceivably link into Passbook and bypass NFC altogether.

[ABOVE: A demo of Apple's Passbook tech.]

Banker's interest

Banks are interested in NFC because it will enable them to maintain their payment processing businesses. These are under threat as alternate providers, such as iTunes, Paypal or Google Wallet, enter the fray. 

With so much investment already made NFC operators are a determined bunch. It’s possible the iCarte system -- protective cases which include NFC and are made available for interested parties -- is an ideal route to bring the technology to smartphones. 

Why ideal?

Because it simplifies the standards that need to be supported within an NFC iteration. It takes the weight of getting through the fragmented standards market off of the device makers and back into the hands of the carriers and bankers who are most committed to the tech. 

It’s also potentially a portable system: if you’re traveling, you should only need to contact your NFC service provider to get an iCarte (or other device) that’s configured for payments in the place you’re visiting. 

Meanwhile those who don’t want to use NFC don’t have to squander precious battery life in support of a technology they don’t intend to use.

Death by committee

There will come a point -- possibly in the next year or two -- at which the fragmented environment for the NFC standard(s) changes to something more usable.

It’s only then that it will truly make sense for device makers to invest in supporting the technology. At present it’s an investment in something that’s not yet ready for prime time and doesn’t yet have mass market attention.

There’s probably only a limited time in which the NFC industry can address this problem. Apple’s move to develop its own solution that leads toward mobile payments shows that other options are available.

The threat is that NFC as a solution waiting to happen to a question consumers aren’t asking yet may face the grimmest fate of all if it lags in making itself marketable: death by committee.

But as Square, iCarte and other systems show, your iPhone is already your wallet, if you want it to be. But for most of us cash will do.

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