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Once again, Apple bypasses NFC in its new iPhones

NFC mobile wallet is dead, one analyst proclaims

September 11, 2013 06:00 AM ET

Computerworld - Maybe this wasn't a surprise: Apple announced the new iPhone 5S and iPhone 5C on Tuesday, but neither comes equipped with an NFC chip inside.

Instead, Apple has opted for a unique new fingerprint sensor, the Touch ID, which allows a simple touch of a finger to unlock the phone or to make purchases from the App Store and the iTunes and iBooks retail sites. It's faster than typing a password.

Apple has once again dismissed the mobile wallet and data-sharing capabilities of near field communication (NFC) technology. Meanwhile, NFC is being used in dozens of new Android phones, such as the Samsung Galaxy S4, and in phones running the BlackBerry and Windows Phone operating systems.

Apple's decision is clearly the result of a long-term competitive strategy based on a projection of how the mobile payments business will evolve. The move serves to benefit Apple most of all, analysts said.

Touch ID will help push purchases to Apple's content stores and the company's decision to use that technology "says that Apple has decided that fingers are better than near field radios for [ensuring that] transactions are secure," said Carl Howe, an analyst at Yankee Group. "If nothing else, consumers will understand fingerprints better."

Leaving out NFC in the newest iPhone also creates challenges for Google Wallet and Isis, a consortium of wireless carriers that are trying to roll out an NFC mobile payment system nationally.

"I think NFC mobile wallet is a dead letter outside of Japan. It's just not going to happen," said Ezra Gottheil, an analyst at Technology Business Research, upon hearing of Apple's continued rejection of NFC. "I think businesses will simply convert to bar-code scanners that can read [QR codes on] smartphones. Or perhaps a Wi-Fi-based solution will be adopted."

Jordan McKee, another Yankee Group analyst, said Apple's decision will prove to be a "roadblock to any mobile wallet based on NFC that doesn't have a QR reader option," though he did say that NFC will eventually gain some traction in the U.S.

"Apple's announcement is troublesome for NFC, which will get there eventually but is not happening overnight," said McKee, adding that Apple clearly didn't see a business case for NFC.

"Neither [Isis nor Google Wallet] is popular enough for Apple, and more importantly, neither offers Apple any good way to monetize the addition of NFC in their devices," said Jack Gold, an analyst at J.Gold Associates.

Although Apple has so far not offered a way for its phones to connect to NFC reader terminals at stores and transit stops, the terminals are in wide use in some Asian countries. And use of NFC equipment is expected to grow more commonplace in the U.S. by late 2015 as credit card companies push for in-store terminals that accept more secure smart chip card transactions and are compatible with smartphone NFC chips, McKee said.

Apple's Passbook application works through optical scanning of QR codes, which allows people to, essentially, use their iPhones in lieu of tickets or boarding passes. Some analysts believe use of QR codes could become far more prevalent for mobile wallet transactions in the next two years, while they project slower growth for NFC mobile wallets.

Gottheil and other analysts said that NFC might come to the iPhone in the next generation as perhaps another authentication system similar to what the Moto X now provides.

Carolina Milanesi, an analyst at Gartner, said Apple will probably add support for NFC at some point because it can't avoid a universal wireless technology for sharing data with people who use devices that run other operating systems.

Apple in June said that AirDrop file-sharing technology would be included in iOS 7. AirDrop relies on Bluetooth and Wi-Fi, but not NFC. The iOS 7 operating system will be available for free on the iPhone 4 and later devices on Sept. 18 and will ship in the new iPhone 5S and iPhone 5C.

"NFC will be added to iPhones when Apple figures out how they can either add value or monetize it," Milanesi said. "For Apple, there is no immediate need."

NFC also has a role in allowing authentication, Milanesi added. "I doubt Apple could stay away from it."

This article, "Once Again, Apple Bypasses NFC in Its New iPhones," was originally published on Computerworld.com.

Keith Shaw and Ken Mingis discuss a few surprises from the Sept. 10 Apple event, in which the iPhone 5S and 5C phones were announced.

covers mobile and wireless, smartphones and other handhelds, and wireless networking for Computerworld. Follow Matt on Twitter at Twitter @matthamblen, or subscribe to Hamblen RSSMatt's RSS feed. His email address is mhamblen@computerworld.com.

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