Competition in the mobile-payments sector is exploding with a vengeance, with dozens of companies trying to figure out the next revolution of payments. It's a movement that's been a long time coming, replacing old-fashioned wallets with digital ones built into mobile devices.
For now, consumer adoption remains relatively tepid. Think about it: How often have you seen someone use a smartphone to pay for a purchase, even though there are a myriad of existing options out there today?
To NFC ...
Looking to broaden their revenue streams, wireless carriers AT&T, Verizon, and T-Mobile have been jointly building their own mobile payment network called ISIS for years, also using NFC technology.
Or not to NFC ...
The biggest hurdle for widespread NFC adoption is that it requires hardware on both ends, the consumer's device and at the merchant's point-of-sale. That's a steep ramp to climb, because it requires everyone to buy a smartphone that sports an NFC-chip and merchants to spend to invest in upgrading infrastructure. Then you run into a chicken-and-egg conundrum. It's only useful for consumers if merchants support it, but merchants will only add support if it's widely adopted by consumers.
NPD analyst Linda Barrabee adds: "NFC-based mobile wallet plays will be disadvantaged in the [short term because of] lack of hardware. This potentially gives PayPal, among others, some running room." On eBay's second-quarter conference call, CEO John Donahoe said, "When is [NFC] going to be ready? Never."
In addition, it's debatable if NFC really adds any convenience to the payment process, since swiping a credit card and tapping a smartphone take about the same amount of time. Only about 1% of phones currently sold have the requisite NFC chips, with many recent Android devices leading the way, including the two most recent Samsung-built Nexus devices, the Nexus S and Galaxy Nexus.
… That is the question
Meanwhile, Apple sits silently on the sidelines, waiting until the water is warm before jumping in.
According to The Wall Street Journal, the iPhone maker is biding its time for an inevitable foray. The company has considered a wide array of alternatives, even potentially building its own payment network. Apple's hardware engineers have considered NFC, which has not been included on any Apple device to date, but would be concerned about space constraints. As iPhones continue to get thinner, there's not much real estate inside to spare. The industry will be watching to see whether the next iPhone will have an NFC chip, after it didn't make the cut last year.
Apple would be more interested in a way that taps into the cloud as opposed to relying on an incomplete hardware infrastructure. It now has 400 million active iTunes accounts with credit cards on file, and the stepping stone that was agreed upon was the Passbook app that was unveiled last month, aggregating wallet-related information.
Ready to pounce
There's little doubt over whether Apple will jump into the payments ring, and in characteristic fashion it will make a big splash. Apple only adopts future technologies on the rise, and one could argue whether NFC qualifies. It's not a new technology, but it has been garnering attention lately primarily for its payment potentials. Cupertino also generally shies away from half-baked offerings, Siri notwithstanding, and going all the way with NFC doesn't seem realistic lacking infrastructure.
For now, Apple continues to wait and see, but one day soon it will most assuredly get in on the payment action.
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