The iPhone 5 has arrived.
Apple unveiled its flagship device at an event at San Francisco's Moscone Center earlier today amid the hype that usually surrounds Apple events. And while the new iPhone 5 offered some new features, namely a larger display and thinner profile, it did not include one feature that many in the mobile payment space were hoping for: NFC.
Rumors and counter-rumors had been flying for months preceding today's launch, with leaked photos of the device used as evidence that the new iPhone either would or would not incorporate NFC. But in the end, NFC was left off of the new device.
So now that the iPhone 5 is being released without the technology — which many mobile payment schemes use to transmit data at the point of sale — the big question becomes, "What does this mean for mobile payments and NFC?" Is Apple's omission of the technology from its popular smartphone enough to make a difference in the adoption of NFC, or in the way mobile payments develop?
A speed bump, not a roadblock
According to Steve Gurley, president of Pyrim Technologies Inc., a startup focused on the marketing potential of NFC, the absence of the technology in the iPhone 5 isn't going to kill the technology. If Apple doesn't have it, he said in an interview, NFC will still advance, if only a little more slowly.
Gurley pointed to other manufacturers, such as Samsung, RIM and Nokia, who are adopting the technology. "You can't ignore that others are integrating NFC in their devices," he said.
The problem now with NFC may be that consumers don't know enough about it, or haven't seen enough compelling use cases, to demand the technology in their devices, Gurley said. "The use cases are easy to understand," he explained, "but there's no unified use case that consumers can rally around. It'll be up to developers to come up with compelling use cases people can understand."
And what about the one use case that the mobile payment market wants NFC for — namely, using the smartphone to pay for things at the point of sale? Gurley said NFC and mobile payments shouldn't be thought of as the same thing, and how they develop is not mutually dependent. "So many people have confused NFC with mobile wallet," Gurley said. "Some have concluded no NFC, no wallet. You don't have to have NFC to have a wallet."
Missing the NFC boat
For Einar Rosenberg, who has been working with NFC technologies for more than a decade, not using NFC in the iPhone doesn't hurt the technology at all; it hurts Apple. He too pointed to other manufacturers who use the technology as an indication that Apple is out of step.
"We know that nine out of the top 10 phone makers are putting NFC into their phones right now," Rosenberg said in an email. "We know over 100 million mobile devices today are NFC-enabled — 20 million plus in the U.S." All the major wireless carriers have committed to NFC as well as many mobile operators worldwide, Rosenberg said. And he added that the majority of phones released by wireless companies in the U.S. in the past three months are NFC-enabled.
What's more, Rosenberg said, it's not about carriers and handset manufacturers pushing a technology that no one wants.
"NFC isn’t theoretical," Rosenberg said. "People are actually using it."
According to Rosenberg, there are already more than a thousand NFC apps available for Android and a number of industries are integrating the technology.
"NFC has existing infrastructure from very large industries, such as millions of payment terminals at hundreds of thousands of retailers; the majority of major cities have NFC-capable transit, and the majority of access control systems are NFC capable," he said.
That's not to say Apple is completely eschewing mobile transactions using the iPhone 5. During today's announcement, the company showed off its new hardware by demonstrating the Passbook application it's bundling with its next generation mobile operating system, iOS 6. Passbook is a "lite" version of a digital wallet that allows users to virtually store tickets, gift cards and boarding passes, all of which are updated in real-time. Anything in the digital wallet that uses a QR or barcode for recognition can be scanned on the phone. In time, the app could integrate NFC to transmit the data from tickets or loyalty cards stored in the app.
For Rosenberg, that's a step in the direction of mobile payments, but it will have limited utility for most merchants.
"Remember that very few retailers today have optical scanners (for barcodes)," Rosenberg said. "While it’s nice to see passbook showing off things like your Starbucks card or tickets for your flight, the reality is that few places even offer this capability." He said industries including airlines are moving to NFC as their standard and have publicly stated as much.
By not putting NFC in it's newest iPhone, Rosenberg said, Apple may be missing the proverbial boat. Not including NFC on the iPhone 5 could put Apple way behind the rest of the field. Because if it waits another year to include NFC on its devices, iPhone 5 devices sold now on standard contracts won't be replaced for a couple of years at least.
For more stories like this, visit the NFC/Contactless research center.