Friday, September 20, 2013
It has become an annual rite of passage. Each year Apple Inc. reveals new iterations of its iconic iPhone that do not include near field communication (NFC), and each year critics call it a serious blow to the prospects for the proximity payments technology.
On Sept. 10, 2013, Apple unveiled two new iPhone models, neither of which are integrated with NFC. But Randy Vanderhoof, Director of the Smart Card Alliance, said Apple's lack of NFC adoption is of little significance to the direction of the NFC market, and naysayers mistake Apple's deliberate approach to technology adoption as a rejection of NFC.
Vanderhoof stated that the percentage of iPhones in the marketplace is diminishing, and the number of Android-based smartphones that incorporate NFC is increasing. "So I think the significance of Apple continues to become less over time as more and more models and devices with NFC reach the market," he said.
Additionally, Apple takes a pragmatic approach when it comes to integrating technologies into its products. "Historically, Apple has waited for new technologies to settle down and become deployed and get the kinks worked out," Vanderhoof said. "And then they capitalize on that with usually a more elegant, advanced implementation of it. Since NFC is happening in small strides, rather than a massive rush, Apple has time to wait before it incorporates it into their system."
Vanderhoof believes Apple will adopt NFC eventually, but only as part of a larger integration between the iPhone, iTunes and the other services that operate within the Apple ecosystem. But the Cupertino, Calif.-based tech giant did make a move that could be considered a precursor to the adoption of NFC when it unveiled a thumb print biometric scanning mechanism for its new high-end iPhone 5S.
The new security feature, called Touch ID, comes in the form of a sensor below the iPhone's display screen that is protected by a "sapphire crystal overlay," which also functions as the lens for the sensor, Apple said. Vanderhoof suspects that the addition is part of a larger strategy that may include NFC. Working out fingerprint biometric security "before you put something as important and security intensive as a payments application through NFC into the phone actually could work to their advantage," he said.
Apple's apparent reluctance to adopt NFC can be contrasted with how Google Inc. tackled NFC via Google Wallet, with mixed results. Vanderhoof said Google Wallet was a "half-hearted attempt, and there really wasn't a strong strategy to get behind it and push it forward."
Google struggled to get mobile handset developers to allow the NFC-enabled mobile wallet on their smartphone models. Card issuers were also slow to integrate their payment cards with the mobile wallet. Another issue concerned mobile telecommunication network operators.
Vanderhoof said conflict arose when the mobile networks would not recognize and enable Google Wallet to operate on their networks. Such a problem is not being experienced by the other prominent mobile NFC wallet venture, Isis, since the largest U.S. mobile networks are running it.
Vanderhoof believes the joint venture of AT&T Mobility, T-Mobile US Inc. and Verizon Wireless is taking the right approach to rolling out NFC payments. "They're building out the technology and the mobile wallet and the device," he said. "And they are lining up the partners in the financial industry, in the merchant industry, to be ready so that when they do their full launch, they have all of the parts in place, tested and working."
When Isis is launched out of pilot mode (expected to occur before the end of 2013), it is critical that it works seamlessly, according to Vanderhoof. "It's got to work right out of the box or else consumers will quickly look toward something else," he said.
Isis has been criticized for being slow to develop. But Vanderhoof said the payments industry is the most difficult market in which to operate, with many stakeholders involved in the process – from issuers, processors, mobile telecoms and device manufacturers on one side, to merchants on the other.
The Isis model positions the mobile networks as the controlling parties in the scheme. As Vanderhoof said, "The mobile networks are in that primary landlord mode where they control the device and the secure element in the device and are working out the business terms with the financial institutions and the merchants in terms of how that's used."
But being in a subservient role is not a common one for Apple and its controlling, closed-system approach. "If Apple comes in with their own implementation of NFC on their device and everything needs to go through Apple, it's going to directly conflict with what the mobile networks in the United States envision NFC to be," Vanderhoof said.
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