Why did Apple launch without nfc? Guest post from Jonathan Jensen

nfc apple mobile payments iphone 5 jonathan jensen

The big hope for the future of contactless payments launched recently without the NFC chip that would enable the iPhone 5 to drive forward the adoption of mobile payments in the mass consumer market. So why did Apple launch its latest device without NFC? Even allowing for Apple’s usual strategy of not being first, just being better, it feels like an omission and a missed opportunity for Apple. However given the fragmented state of the NFC market worldwide; the power draw on the battery of an additional radio; and the opportunity for Apple to leverage its existing payment accounts, rather than support Visa and MasterCard’s rails; then it begins to look very logical.

This episode underpins the argument that consumer payments innovation is still a confusing and baffling market for most consumers. Contactless take up has been slow on the card issuer side, the merchant acceptance side and the consumer usage side. That virtuous circle seems to be flaky at best.

But do consumers care about contactless payments? Contactless is meant to be simple but has the industry done enough to make it the default choice for consumers? More of my cards lack the contactless symbol than have it. Why do some PoS systems require me to ask to pay by contactless rather than assuming I will? As a firm proponent of contactless payments I always try to use my Bank of America PayPass MasterCard but contactless authorisation frequently fails; when I put it in the chip and PIN reader is goes through fine.

Apple’s view that Passbook is more relevant to consumers than NFC actually makes a lot of sense from the mass consumer perspective. It will drive non NFC contactless payment capabilities like the existing Starbucks prepaid ‘card’ app. And crucially it will improve the consumer payment experience with context sensitive popups – simple to use and a reminder to use.

Consumers care about cost, convenience and experience. If the industry focusses on those factors it can nudge consumers in the right direction. NFC is certainly one future for payments and people like Movenbank will make it relevant to consumers by combining it with an outstanding user experience. But the industry as a whole can do so much more to make it happen.

My final thought; it would be unpopular but pricing cash to reflect its financial and social costs would undoubtedly drive alternative payment models!

Confusion in the consumer payments market is a theme I will be returning to.

You can follow Jonathan Jensen on Twitter at @sevendotzero

nfc apple mobile payments iphone 5 jonathan jensen

Comments

  1. Peter Rand

    Interesting comment. Here in Australia contactless is going well. Major supermarket and gas station chains are enabling contactless, we even have it virtually all of in the restaurants and cafes in our office. Contactless is now on many consumer and commercial cards. In personal experience I am yet to see any issues using the contactless features of my ANZ and Nab issued consumer and commercial cards. I wonder whether the real reason for its omission is Apple’s desire to be different from mainstream? Overall the iPhone 5 seems an underwhelming release and I struggle to see what the consumer hysteria is all about. Ultimately the ability to have contactless on my cell phone will make my life simpler!

  2. Jonathan Jensen

    Thanks for your thoughts and good to hear contactless is going well in Australia. I agree that Apple probably does want to be different and own the end-to-end consumer experience. Your comments re Australia show the different pace of contactless adoption worldwide. Interestingly, neither of my UK issued National Australia Group cards are contactless!

    Apart from the lack of NFC I’m not sure what else the iPhone 5 should have had. Undo the bonnet it is a major upgrade.

  3. Christine

    I don’t see the ROI for putting NFC on iPhone 5 at this time. With consumers yearning for other features, is NFC really the priority? I’d rather see an improvement in their iphone/icloud service. Have you heard of the Barclaycard PayTag? The consumer can get it free and put onto any cell phone. There are limitations, but it’s an example of why it may be premature to add more cost to the phone for something the vast majority of Americans are not yet using.

  4. Jonathan Jensen

    Fair comments and that seems to be Apple’s view. I have seen PayTag. It’s a neat solution although doesn’t provide the app integration true NFC does.

  5. Joao Rostli

    Why didn’t Apple just put the chip in it. Many people started playing with nfc tags already. Apple could leave alone the contactless payments for a year. That would be an acceptable interim solution.

  6. Jonathan Jensen

    I think if Apple put a NFC chip in then they come under pressure to support it. That means having a strategy to create an Apple NFC experience. Plus, if it’s there it drains the battery.

    1. Richard Garrison

      That actually is false. NFC has a passive operating mode where it is not using any power at all. It can be activated by another device transmitting to it, and even be powered by the other device.

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  8. James Smith

    It’s important in my mind to draw the distinction between Contactless payments and NFC technology.

    The first requires an accepting terminal in the places you shop, which by virtue of the current scheme limitations (transactions below £20 in the UK don’t require a PIN) will be for low value items in busy environments where speed is of the essence e.g. Fast food. Until the accepting terminals are widespread, the value of this technology is limited. For merchants it costs more money on three grounds; (1) upgrading the terminals, (2) educating staff and customers and (3) the credit/fraud liability they carry when a PIN isn’t used. At the margin is this worth a slightly faster payment? Only for highly efficient operations where margins are thin and footfall / queue time are critical value drivers.

    With the purchase cycle of phones being every 1-2 years, there’s no need for Apple to jump the gun. Far better to use the existing infrastructure at interaction points e.g. bar code scanners or cloud based apps.

    Looking through Apple’s NFC patents, it appears they have a much broader view of the potential uses of this technology. It’s quite possible that when Apple introduce it, they may well use it as a mechanism for iDevice to iDevice communication first and foremost, to build familiarity with the technology focused in a commercial avenue where the margins are high. Gifting DRM content for example from one user to another at 30% margin via NFC “bumping” is perhaps more attractive than participating in payment processing where margins are significantly thinner. Monetizing data at the point of sale is already well within their grasp given their control of the mobile OS. If and when Contactless payments become a deciding factor in the purchase of your next phone for the majority of customers, Apple will undoubtly participate.

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