Although most of the civilized world outside of the U.S. is moving towards Near-Field- Communication technology, Apple deliberately left the chips out of the iPhone 5, slowing the Western market transition.
Popular in Europe and Asia, Near-Field-Communication Technology (NFC) is having a hard time making the jump to the states. Supporters of the next-generation chip had hoped that the latest Apple iPhone 5 release would include a device with such capabilities, capabilities that would help usher Apple (and North America) into the same boat as the rest of the world. Unfortunately, Apple went against cry of the people and opted to leave the innovation out of their latest phone iteration.
To get a better idea as to why this is such a big deal you first need to understand what NFC technology is supposed to do. Basically, NFC allows for two compatible devices to transmit information back and forth without having to use precious phone minutes or data. They will basically communicate simply by being next to each other. Obviously, there is a great benefit for this in the retail market as this no-touch system could shave seconds off of every transaction, allowing for more streamlined checkouts and, hopefully, improved overall efficiency.
Proponents of this technology already know that the largest mobile carriers and credit card companies in the U.S. (and the world) are fully prepared to back it is the next the big thing. Unfortunately for consumers in the U.S., though, many merchants are shying away from NFC simply because they do not want to (or, perhaps more accurately, cannot afford to) upgrade their checkout terminals to allow for it. Still, NFC technology is fully backed by Isis (the mobile wallet conglomerate of Verizon Wireless, AT&T, and T-Mobile), which is also partnered with American Express, JPMorgan Chase, and Capital One Financial.
While all of this may sound well and good the problem presented by NFC inclusion is very basic, but it is still a significant one. Apple, for example, does not want to shoulder the extra cost of developing and engineering new components that would allow for embedding NFC chips (because of the merchant reluctance as mentioned earlier). At the same time, merchants are still reluctant as well, waiting to see more NFC-capable devices. It’s a catch-22.
Apple isn’t out of the loop, though, when it comes to the next generation of payment systems. Although they may not be willing to overhaul their current system to integrate something that doesn’t necessarily solve an existing problem (as per Apple’s marketing chief Phil Schiller), they are still moving forward in the mobile payment department. Currently they are developing Passbook, a mobile app that allows users to combine the effective benefits of loyalty cards, tickets and coupons into one convenient iOS application. Some analysts insist that this is a primitive version of the mobile wallet, something in widespread development in the communication technology industry.
PayPal is a good company to watch in this respect and they are confident that efficiency of use is important to consumers when it comes to digital wallets. Their senior director of products, Carey Kolaja, says
Technology is not what’s going to win this digital wallet war. It’s going to be about the consumer value proposition.
This is the exact same argument that Apple makes in regards to why they have yet to jump on the NFC bandwagon. As Rick Oglesby of consulting firm Aite Group says:
[Apple] won’t do something until they know a lot of their customers will use the service.
According to Sanjay Sakhrani, analysit with Keefe, Bruyette, & Woods
Anyone hoping NFC would be a reality soon is disappointed. Many in the industry were hoping inclusion in the iPhone would be a springboard for more adoption. This takes the impetus away.