Near Field Communication (NFC) is an emerging technology that allows the user to wave or tap an enabled credit card or smartphone near a point-of-sale (POS) payment terminal as an option to swiping the card. Several handset makers, including Samsung, Nokia, HTC, Motorola, Google and Sony, have integrated NFC into some of their models. These companies support the technology for its ability to turn their devices into mobile wallets, allowing users to make purchases and digitally store other types of consumer data.
Apple’s iPhone 5, released in September 2012, does not include the NFC function, prompting the question of whether Apple is hedging its bets on NFC as a major force in mobile payments. Some analysts argue that the omission by Apple of NFC means that this payment system could struggle for at least another year to gain traction with consumers and merchants.
Jack Gold, an analyst at J.Gold Associates, has stated that there was no compelling reason for Apple to provide NFC at this time. “NFC has taken off very slowly and will likely take at least a couple more years to catch on,” he said in a recent interview. Carolina Milanesi, an analyst at Gartner, agreed, adding that there's no real consumer demand for NFC. She said, “This doesn't mean Apple is not interested in NFC. They will do it when they can take advantage of it and deliver a differentiated solution to users.”
Several telcoms currently support NFC, including Sprint and the Isis consortium of Verizon, AT&T and T-Mobile. Additionally, the major credit card companies (American Express, Visa, MasterCard, Discover) have either introduced or plan to incorporate NFC in the card processing operations. For example, MasterCard’s PayPass and Visa’s payWave currently support merchants with NFC-enabled terminals. Because of this emerging trend, analysts have questioned Apple’s decision to release the iPhone 5 without NFC capability. Does it mean further delay in mobile payments taking off, or, on the flip side, is this an opportunity for its competitors to take a lead in this field?
After all, credit card companies charge merchants an interchange fee whether the card is swiped, waved or tapped by the consumer. That significant revenue stream is not interrupted by NFC technology. The card companies would certainly be up in arms against NFC otherwise. In 2009, the value of those collected just by MasterCard and Visa was between $35 billion and $45 billion, according to a Federal Reserve report.
Swipe or tap, the decision ultimately rests with the merchant and consumer. NFC mobile payment technology is still in its emerging phase, with several barriers to entry before it becomes more widely adopted. Only time will tell if Apple made the correct decision in waiting to incorporate NFC in its most recent iPhone release.
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