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NFC could debut in next iPhone, even as Google pulls back

Some still see no advantage for Apple to include NFC as merchant acceptance is slow in the U.S.

August 14, 2013 12:27 PM ET

Computerworld - Mobile payments based on NFC chips inside smartphones have faced slow growth in the U.S., but some analysts predict that the upcoming iPhone 5S expected in September will include NFC technology after years of restraint by Apple.

If so, Apple's gradual move toward NFC (near-field communication) to complement its existing Passbook application would come at the same time that Google somewhat retreated on NFC.

In a recent email to Google Wallet users, Google said it will end NFC redemption of gift and loyalty cards added to Google Wallet on Aug. 21. Google said its announcement does not affect NFC credit and debit card payments and added that it is working with retailers on other options for gift and loyalty cards.

In an unrelated move toward NFC adoption, Isis, an NFC-based mobile wallet joint venture of three U.S. wireless carriers, last month said it would roll out its mobile wallet to the entire nation later this year, following testing in two cities. The Isis mobile payment app is supported by 35 NFC-ready smartphone models, mostly based on Android, that are sold by the three carriers -- AT&T, Verizon Wireless and T-Mobile US.

One analyst who said the next iPhone will include NFC also said there's a small possibility that Google's recent statements indicate it could completely abandon NFC for mobile payments in the next few years.

"Nobody would be surprised if Google did away with NFC support," said Yankee Group analyst Jordan McKee, in an interview. "They're a little bit scared of it." While McKee is a proponent of NFC for mobile payments, he wrote in a blog that NFC adoption in the U.S. for mobile point-of-sale payments remains "negligible," adding that "any payment method based on the technology will continue to clutch at straws."

McKee said if Apple puts NFC in the next iPhone, "it will be interesting to see what avenue Apple takes with it, and I hope it's not proprietary and limits the function of NFC and the growing momentum toward it." Apple's use of QR scanning with its current iPhones to support its Passbook app for redemption of loyalty and gift has resonated well with both merchants and consumers, he said.

In fact, barcode scanning and QR code scanning using smartphones have worked well for Starbucks and others, which could well be a future direction for Google instead of NFC, analysts said.

Ezra Gottheil, analyst at Technology Business Research, also said he expects the next iPhone, possibly called the iPhone 5S, to have NFC. "As a payments system, NFC suffers from a chicken-egg problem, but Apple may be able to persuade specific verticals, like airlines, to deploy NFC for faster boarding," Gottheil said.

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