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Did Apple Just Kill NFC?

1:55 PM -- Apple Inc. (Nasdaq: AAPL)'s exclusion of Near-Field Communications (NFC) from the iPhone 5 could have farther reaching repercussions than just disappointing those who wanted to ditch their wallet for their new phone. (See iPhone 5 Arrives With 4G LTE.)

I think it's reasonable to suggest that Apple's NFC slight will set the entire market back a year -- possibly even two, when you think about the iPhone case and accessory market that's put on hold now. (See Apple iPhone 5: What Happened & What Didn't .)

I realize that's giving a lot of credit to one company in a market that many more are working on, but hear me out. Apple's mobile products are responsible for making a lot of technologies mainstream. Video chat existed before FaceTime, but it wasn't well known. Mobile apps were around, but Apple's App Store caused them to blow up.

Apple's brand power aside, the contactless market is shaping up on its own, without NFC. Sure, some companies, like the wireless operators' Isis and handset makers like Nokia Corp. (NYSE: NOK) and BlackBerry are planning to evangelize it, but it's been a slow-moving process and there's plenty of alternatives that are doing quite well in the interim. (See 5 iPhone 5 Features Carriers Should Care About and iPhone 5: Which 4G Carrier to Pick?)

Square Inc. is the best example now. It has inked deals with most major credit cards, not to mention is the mobile payments vendor for Starbucks, and it's on track to process $6 billion in transactions this year. It's an easy technology to use, doesn't require a new chip in handsets to implement, and it's popular with merchants, too. None of that can be said for NFC.

As to why Apple didn't include NFC, Senior VP Paul Shiller tells AllThingsD that NFC is a solution looking for a problem. Apple's Passbook app, which let users store their mobile tickets and loyalty cards, does enough for most consumers, he believes. (See Apple Could Make Mobile Payments AuthenTec.)

He may be right but, by that logic, why not continue refining 3G on the iPhone for wireless connections? After all, users don't really need 4G wireless.

What NFC does provide is at least the concept of a standard way for carriers, vendors and third parties to support contactless payments on a smartphone. Apple passing over the technology for another year or more, however, will make it more likely that other, likely non-standard, ways of doing the same thing will gain enough traction to make NFC technology less attractive to implement for major retail outlets, particularly in the U.S., as well as wireless providers of all stripes.

So if Apple hasn't killed NFC with non-inclusion this time around, it has certainly given the would-be mobile wallet tech a serious mugging and sent it reeling into an uncertain future.

— Sarah Reedy, Senior Reporter, Light Reading Mobile

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shygye75 12/5/2012 | 5:21:02 PM
re: Did Apple Just Kill NFC?

Surveys suggest that more than 20% of mobile phone users have either lost their phone or had it stolen at some point. That is a huge revenue opportunity for the bad guys.

ethertype 12/5/2012 | 5:21:01 PM
re: Did Apple Just Kill NFC?

I think you're onto an important point here. &nbsp;Apple may be holding back in part because of security issues. &nbsp;Once any standard takes off, it will be a big target for bad guys, and not just the ones who "find" phones. &nbsp;i have maintained for some time that payment systems will only look secure enough to replace a large fraction of transactions when you can offer 2-factor authentication (device + shared secret, i.e. password or equivalent) as the default, and 3-factor (adding bio ID) as a requirement for larger transactions or as an option for customers to protect themselves on smaller transactions. &nbsp;The latter will require a fingerprint reader or retina scan on the phone. &nbsp;NFC doesn't solve 2- or 3-factor auth. &nbsp;It's just a more convenient way to present your single-factor credential (i.e. the device). &nbsp;People love to talk about "wave and go" transactions, but let's face it, those will need to be restricted to a modest number of very small transactions per day.


More broadly, I believe Apple has not yet worked out how to ensure that the overall user experience of mobile payments, including security, is Apple-worthy. &nbsp;To achieve that, they will need to have a strong role in the mobile payments ecosystem, which likely puts them in competition with a lot of other players. &nbsp;And of course, that could be more profitable for them as well. &nbsp;Maybe they could get a cut of the processing fees, or maybe they even see the opportunity to become a bank and disrupt yet another industry. &nbsp;But doing those things is way harder than just throwing a chip in a phone.

JohnVoda 12/5/2012 | 5:21:01 PM
re: Did Apple Just Kill NFC?

I agree that security is an unknown, and Apple doesn't want to dive into a area that might explode in their face. Smartphone hacking is picking up, and making the devices even MORE hack-worthy (i.e. the NFC/mobile wallet) needs to wait until security/identification is 100% effective and (especially for Apple) easy to use/user friendly.

somedumbPM 12/5/2012 | 5:20:59 PM
re: Did Apple Just Kill NFC?

I agree with the security concerns and think that NFC is stillborn due to its design.&nbsp; I already have a single factor credential - cash, which is more secure than NFC as no one can access it other than in its physical form.&nbsp;&nbsp;I see NFC solely&nbsp;as a&nbsp;convenience for the user at the expense of security.


Living in the skimming haven of Miami where there are streets that credit card companies do not allow use of their cards for gas because of the amount of skimming losses they have taken, I appreciate more secure methods of payment.


Not having NFC is a checkmark on the plus side for me, as I am one of those guys that turns off Bluetooth and restricts access to any "cloud" type services as much as possible.

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