Why the iPhone 5 means that NFC won’t grow as fast as expected

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iPhone 5 front and back

I think we’ve already forgotten that it took so long for us to get to the year of the mobile that was 2010, that we’re expecting similar speed in the roll-out of mobile payments solutions.

Everyone and their grandmother expects that in the next year or two, your mobile phone will become your wallet and your credit card and that in order to pay, all you’ll need to do is wave it at a point of sale (POS) terminal or at another mobile handset, so that money can be magically transferred from your bank account.

Credit cards and cash are apparently finally heading for the same heap as the VHS tape, the vinyl LP or the cheque (minus 10 points if you still have a cheque book). The technology standards that are in the lead as the enablers for this massive disruptive change are titled NFC.

Tech analysis company Juniper Research reduced its estimates of the value of NFC mobile payments by 2017 within a year — solely because the iPhone 5 didn’t include support for these technologies! Did we forget that the VISA card was launched in 1958 and we’re still nowhere near to full credit card adoption? Things in money land do not change that quickly.

So why the change of mind? Juniper quite correctly contends that Apple has recently become the key driver of the adoption of mobile consumer technology. The iPhone was not the first touch-screen mobile phone, but it did recreate the category, made it a highly desirable form factor that is still dominant for its desirability and profitability in the mobile phone category, five years after launch. (Remember when some customers still professed to want a BlackBerry with a QWERTY keyboard and not a touch screen – minus another 10 points if that was you!)

A similar argument holds for the iPad, which created massive demand for a whole new category of mobile consumer devices that didn’t exist before the iPad was launched in 2010. I recall holding my original iPad in my palms and wondering what I was going to do with it, but I sure did want one.

Juniper contends that without the brand, marketing and fanboys with deep pockets that Apple would have brought to the NFC party, widespread NFC adoption is delayed by at least another two years.

What makes this particular story even more interesting, is that the future of what is more widely termed “proximity mobile payments” is far from settled — Apple was recently granted a US patent for an alternative to NFC. We’re likely looking at a new VHS vs BetaMax or Blue Ray vs HD DVD standards battle, where the winner gets to set the high-level technology agenda and benefits from the worldwide licensing revenue.

You can safely buy a new wallet this holiday season – you’re going to need somewhere to put your cash and credit cards for at least another 2 years.

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  • Anonymous

    What about those of us who don’t even HAVE a smartphone?

  • Joe

    @bbde50b88a8dbda887f7daeadd819a64:disqus most people will probably have at least a $50 smartphone within 2 years.

  • Joe

    Hey Llew, nice read. You don’t need NFC in the phone to do payments. Check out: http://www.gustpay.com

  • http://twitter.com/LlewClaasen LlewClaasen

    Tks Joe, will definitely check out Gustpay

  • anonymoustroll

    Understandable that you would post a comment like that anonymously..

  • Biscuit1018

    Everyone and their grandmother expects that in the next year or two, your mobile phone will become your wallet? Using NFC? And the iPhone will slow it down? I find the logic here rather circular. I have read many mobile payments white papers and many experts don’t buy that NFC is the answer. Even so I find the 2 year prediction unlikely given that we would have to roll out payment terminals.

    I doubt whether NFC is the next big thing in payments. The roll out across merchants is one reason. Another is the banks being reluctant or slow to allow their credit cards to be uploaded onto a phone. Banks are releasing NFC enabled cards so in the unlikely even of a terminal existing we will used NFC through a card.

    So how does the phone help when the card is in our pocket anyway.
    I dont see that even in 5 years we will be able to leave our cards @ home

    The logic is circular. If NFC fails to take hold then its because of Apple?

    I think NFC is a great solution for man machine interfaces (like buses etc.)

  • Biscuit1018

    My main point is that NFC is not even close to setting the mobile std for mobile payments.
    So Apple are slowing down something that may or may not be attractive to people in a few years time

  • http://twitter.com/LlewClaasen LlewClaasen

    Hi Biscuit 1018

    Thanks for your comments.

    You’re quite right that a whole ecosystem needs to be in place for mobile proximity payments to become successful, but if one looks at recent graphs indicating the rate at which Apple has increased the speed at which new mobile technologies have been adopted, then we may all have become quite excited at the prospect of Apple handsets supporting NFC.

    An example of how quickly NFC POS can be rolled out, may be Cape Town’s MyCiti bus service, which now has Master Paypass NFC terminals (to recharge the bus fare cards) in almost all fuel stations close to the bus stations – in the last 6-12 months.

    When there is a will, there is a way.

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  • Biscuit1018

    Thanks Lew,

    I don’t doubt that IF Apple had included NFC it would
    have given NFC a needed boost. What I do reject is the implication that
    NFC will be the future standard. No-one knows that and if they did banks would have rolled out NFC faster (and Apple would have included it). NFC not being standard enough is the reason why Apple didnt include it. Apple’s non inclusion is not the reason why NFC may or may not fail to become the std. The std will be set with or without Apple.

    One question about the NFC
    example in CT. I live in CT but in the Southern Suburbs so have never
    used the service. The Gautrain also has NFC.

    Now my question – Can you load you MyCiti or Gautrain card onto a Samsung S3 for example?

    As I said before I see NFC cards (or cards in phones) as perfect for man-machine interfaces where speed is an imperative, access, travel etc.

    For the end consumer NFC has little to offer (apart from the examples above) UNTIL it affords you with the ability to leave your card at home.
    That day, imho is more than 5 years away.

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