NFC: How Apple's iPhone gains on 'Google Wallet' plan

By Jonny Evans

Many believe Apple [AAPL] is exploring use of NFC (Near Field Communications) as part of an authorization system for iDevices. Why hasn't the firm fielded this new iPhone as a wallet technology yet? Perhaps because it's leaving it to arch-enemy Google [GOOG] to make these solutions mainstream.


[ABOVE: The iPhone 4S does not support NFC.]

Leading from behind

Leadership has its price. Take Apple's 'unlock gesture' patent -- the first company to introduce a successful device implementing it, that gesture is now copied everywhere. Can anyone spell "patent litigashun?"

Relax Apple fans -- remember: "Sometimes you can lead from behind". It's clever to let Google do the work, for a change.

NFC is full of promise -- devices toting it are already being used as wallets, boarding passes, event tickets, museum tour guides, stock-taking tools and more. There's a growing body of fervent NFC initiates prepared to spread the gospel of the short range contactless tech -- but there's challenges to wide deployment, these include:

-- Lack of an agreed industry payment processing standard -- meaning terminals and systems aren't yet compatible.
-- Competition between banks eager to embrace the standard yet unwilling to lose their existing credit-processing fiefdoms.
-- Consumers will need to be convinced of the security of NFC payments.
-- Smaller merchants need to be convinced that its worth investing in new NFC payment processing systems.
-- The technology requires NFC chips and radios inside devices -- and these cost cash.

[ABOVE: Nokia is also working hard to bring NFC to the mainstream.]

Closing in on critical mass

"As the costs of NFC chips decline, and NFC radios are combined with other chip functions, the cost to integrate NFC into handsets will be outweighed by the benefits," In-Stat Research Director Allen Nogee said in a statement. We won't be waiting too long. The analysts predict 1.2 billion NFC chips will ship in 2015.

NFC is a great technology in some ways. It's a short-range contactless solution that enables a scanning device to recognize and identify an NFC device. Based on RFID, the standard also includes security features, such as PIN support. Visa and Mastercard are already experimenting with NFC, for which deployment is most advanced in the APAC regions.

There's other competing standards -- not least Bluetooth 4.0 -- but, at least in the latter case, these lack the support of the big credit and banking organizations. Bluetooth 4.0 could conceivably be used as a payment solution, but it would take work to bring such systems to the mass market, and this would be meaningless without industry support.

(Sure, Apple could introduce its own Bluetooth-based payment processing system using iTunes as the virtual bank, but it would then need to evangelize its solution to retailers worldwide. So why bother?)

Look beneath the hood

Don't ignore that Bluetooth connection. "The growth of combo chips will also allow NFC radios to piggyback on technology that already has significant penetration in the market. For example, Bluetooth radios, which currently have 100% market penetration, can be integrated with NFC radios, making the choice to include NFC easy for OEMs," said In-Stat's Allen Nogee.

Does the existing radio inside the iPhone 4S already host such an integrated NFC device, I wonder?

Exploiting the Google-plex

Given that the existing market for NFC has these hang-ups, it makes sense for Apple to sit things out and allow Google -- or, more specifically, Google's long-suffering Android 'partners' -- to evangelize the technology in order to help foster a network of NFC-using merchants and retailers.

After all, what's the use in being able to use your iPhone as wallet if no one's ready to take your cash?

That's not to say work isn't in progress. There's banks who already offer iPhone holders which double-up as NFC devices.

In Singapore, the infocomm regulator and industry partner have stumped-up $40 million to support phone-based payment technologies.

Forrester Research analyst Steve Noble says the "tipping point" will come when NFC is more convenient to use than normal cash or cards.

Building the infrastructure

Some Android-driven and some Nokia-made devices already boast NFC support. At present this is fine if you want to wander into a museum and enjoy some virtual exhibits, or if you happen to be in Tokyo and want to download a special offer from a digital billboard, but these aren't exactly the kind of mass market inflection points you can build an industry on.

Things are changing, of course. MasterCard, Isis, and Citigroup executive's will share their opinions on overcoming lack of devices, the best business models and reaching critical mass for NFC and NFC applications at an industry event in November. New Jersey Transit has become the first public transport agency to adopt Google Wallet mobile contactless payments.

[ABOVE: Google Wallet explained.]

Google Wallet? Yes sir, Google is working hard to create an ecosystem for these payment systems -- raising awareness, visibility and interest in these technologies.

Most recently, The Container Store, Foot Locker, Guess, Jamba Juice, Macy's, OfficeMax, Toys'R'Us and American Eagle have all signed-up. Shoppers at these locations can now pay for items, redeem coupons and earn rewards points all with a single tap of their NFC-enabled handset.

Persuading these big retailers to sign-up for NFC payment support is important, and as the standard reaches critical mass it is likely more international merchants will get involved, eventually creating the kind of payment-taking infrastructure you need to have in place if you want to introduce a mass market device.


Things will gather momentum, until one day Apple CEO, Tim Cook, opens the curtains on his window, sees what time it is and realizes the stage is set for Apple to introduce its NFC-compliant iPhone that -- perhaps -- has a few extra elements designed to make the standard not just interesting from a hardcore technologist or Android-loving geek's point of view, but something seriously sexy for consumers too.

Because that's what Apple does. It makes things that resonate across the mass consciousness. Only this time it is letting Google do the heavy lifting. After all, NFC is a standard -- the secret sauce will be Apple's implementation of it. NFC done right, or done wrong? You decide. Comments below...

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Copyright © 2011 IDG Communications, Inc.

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