The hottest area of speculation at the moment is around Apple’s entry in the payments market. Already early last year, it was being reported that Apple was putting together a payments team, while patent applications revealed that they would likely introduce NFC the iPhone 5, which will probably launch in June 2011.
Now, considering that NFC has been around for a long time and that a flurry of prominent companies, from Visa to the major phone carriers to Google, already have NFC enabled products or trials – why is Apple able to generate so much excitement?
Simply put, Apple has a remarkable track record of popularizing new technologies with a user experience that seamlessly bridges the hardware and software. Like they have previously applied their midas touch to the personal computer, the music player, the mobile phone and most recently the tablet, people are eagerly awaiting what they will do to payments.
Most interestingly, people are asking how they will enter the market? What role will they play in the payments value chain? Consensus says that they will probably use a version of iTunes as a mobile wallet. However, it will be interesting to see if they simply have their customers pay with their credit cards through iTunes or if they attempt to link directly to customers’ bank accounts, and essentially do their own clearing and settlement.
Moreover, what features will they offer their customers? Will they start their own offers and rewards program, similar to what Google is developing? will they do anything cool with the data they collect? How will they extend NFC outside payments – e.g. identification and ticketing?
Also, will they enter the merchant side of the industry? Will they enable the iPhone or iPad as payment terminals by developing NFC readers that plug directly in to the devices? Will they offer data services?
Another interesting perspective is if they will open up their payments platform (iTunes) for external developers to develop application, similar to what Apple has done for the iPhone and iPad and PayPal has done in payments. We are starting to see some interesting developments coming out of PayPal X and cannot even begin to imagine where Apple could take this market.
Still, with all this excitement, we should still remind ourselves that not all Apple launches are a success. Apple TV is a classic example. The payments industry is probably also more complex than industries Apple has previously taken on. It is the quintessential network business, which might not be a good match for Apple’s notoriously proprietary and closed approach.
It would take time for the iPhone 5 to build a user base that is sufficiently attractive for merchants to justify new point of sale investments. If acceptance is not wide from day one, all the excitement that surrounds the launch could whittle away and slow application innovation, etc.
Despite all the excitement and endless opportunities, we should therefore remember that Apple faces big challenges and stiff competition in this field. Still, the buzz generated by an Apple launch, along with all the other launches upcoming launches, could mean that 2011 is finally the breakout year for NFC.
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