Huffpost Technology
The Blog

Featuring fresh takes and real-time analysis from HuffPost's signature lineup of contributors

Brett King Headshot

Why Apple Must Launch NFC in the iPhone 5

Posted: Updated:
APPLE BRAND

On 14th of March 2011, the Independent newspaper from the UK published an article suggesting that the iPhone 5 would not include Near Field Communication (NFC) capability. A few days later on the 17th of March, Forbes rebutted the Guardian's article quoting a source that said NFC was a sure thing. Who's right, and will Apple delay their NFC launch to better perfect the tech?

The Independent article was surprising as it was hot off the heels of Google already launching their Nexus-S handset with NFC capability and a host of other manufacturers were flocking to utilize Android's new OS codenamed Gingerbread. Of course, having an NFC chip in a handset doesn't automatically mean that you can use it in a constructive manner for stuff like payments, coupon redemption and interactions at the point of sale. Then again, if you don't have an NFC chip that's basically a guarantee that you can't do all that sexy contactless stuff (unless you use tags, for example).

The sexiest NFC application coming is obviously payments, but it isn't the only one. We've already seen Google trialing some pretty cool marketing capabilities with one-touch discounts and other types of applications, like NFC bump.

Now that LG, RIM, Nokia, Google, and Samsung have all launched an NFC-enabled phone, Apple really has no choice, but to go one step better. I can't see Steve Jobs, who has made a trademark of the "this changes everything" banter, deciding to give up on NFC until the next generation of iPhone in 2012. Imagine Apple launching the iPhone 5 and trying to position it as "changing everything again" without NFC... not going to happen. The iPhone 5 has to go one step better than Google, RIM and all the others. Catching the competitors isn't going to be enough for Apple.

The loss of POS

The mobile payments space is rapidly heating up. In recent times, Square was attacked pretty vigorously by the likes of VeriFone over their mobile merchant approach. Accusations were flying that the square dongle was little more than a card-skimming device. With Visa recently acquiring a stake in Square, it certainly appears that the smartphone-based POS terminal has hit mainstream.

Certainly, it's not hard to see why Verifone and other POS manufacturers were ramping up the scaremongering over Square's clever approach. Verifone went so far as demanding a recall of the square hardware, which they claimed could be used for card skimming. The beauty of Square's approach was not just the simplicity of the hardware, of course, but the real beauty was in simplifying merchant onboarding. Register online, download the app, plug-in the dongle and go...

The ongoing trick to protecting payments networks like Visa and Mastercard is the ability to leverage off merchants at the point of sale. If, conceivably, most phones within the next two years gain NFC capability, each one of those can become a mobile POS terminal as well as a payment device. Theoretically, circumventing existing payments networks would be possible via the cloud, so card issuers need to rapidly move to providing an economical and interoperable network that is not worth bypassing. POS hardware isn't necessarily a barrier to entry. As the ISIS collaborative recently found out, however, creating a new payments network is tougher than it appears.

One of the main issues is that you might be able to launch a new NFC or Mobile-powered payments network locally in the U.S., but take your NFC phone offshore to the EU or Asia, and it could be worthless. Thus, you need global reach, a ready user base and a strong user experience play to take ground in this space. That leaves PayPal, Google, Apple and maybe Facebook with enough grunt globally to create a new payments paradigm.

The payments imperative

With so much happening in the payments space, then, the iPhone 5 needs to come out swinging. When the 5 launches it needs to be much more than just NFC-enabled, Apple needs to 'change everything' again and the only viable way of doing this is taking a first mover payments capability. That's tougher than what it appears.

Launching NFC payments out of the gate for the iPhone 5 means one of two things. Either Apple needs to come out with either their own payment network based somehow around the iTunes store account as the backbone, or they need to provide seamless integration into existing payments networks provided by the likes of Visa and Mastercard.

Regardless of which of those two outcomes Apple chooses to go with, if they want to change everything it's their only possible choice. It's either that, or let Google change everything and rethink your iPhone branding strategy:

iPhone 5 -- not changing everything, but upgrade anyway...

That's the biggest reason to expect the iPhone 5 not only to have NFC, but to come out of the gate with a swinging payments capability. Get ready to upgrade your life.

From Our Partners