Apple: Taking NFC to the Mainstream?

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.

3 Articles on Innovation in Payments

The Rise of the Hybrid Startup

In this article, Glenn Kelman, the CEO of Redfin, argues that 2011 will be the year of the Hybrid Startup.  Unlike the traditional clicks-and-mortar businesses, that simply add an online presence to its physical-world store, the hybrid business leverages the best of both the online and offline worlds to build entirely new business models. 

Hybrid businesses will enhance customers’ shopping experiences by integrating virtual elements, initially through mobile phones.  Examples are location-based offers, recommendations, augmented reality experiences and so forth. 

As hybrid business are already adding an online layer to the physical-world shopping experience, one would expect that they would take the payment online as well.   

http://techcrunch.com/2010/12/24/hybrid-startup/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+Techcrunch+%28TechCrunch%29

Point of Sale Revolution: Transformation of Payment Acceptance

Point of Sale (POS) acceptance, a once sleepy, commoditised, add-on to the merchant acquiring business, is in the midst of a transformation, with several game-changing players entering the market.

There are three key drivers behind the innovation:

1.     Internet ubiquity at the point of transaction: virtually all merchants have transitioned from dial-up to always-on connections, facilitating an explosion of new capabilities that integrate traditional terminal functions with new loyalty, marketing, and information services

2.     Wireless proliferation: merchants are increasingly equipping the employees with sophisticated, mobile POS tools, such as the iPhone or iPad, which enables the merchant to fundamentally change the shopping experience

3.     Emergence of more sophisticated loyalty solutions: merchants constantly seek to develop more attractive loyalty and marketing programmes.  POS innovation is enabling them to integrate loyalty more seamlessly in the POS experience and to tailor offers more effectively by leverage the data they captured.

These drivers are significantly altering the POS space and making it one of the more innovative parts of the payments value chain.

http://www.thecatalystcode.com/theconversation/blog/2010/12/21/point-of-sale-revolution-transformation-of-payment-acceptance/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+TheCatalystCode+%28The+Catalyst+Code%29

Mobile Apps Wars’ Impact on the Payment Biz

In this article, David Evans points out that it is only just over two years since Steve Jobs open up the iPhone for external apps (October 2008).  There are now more than 100,000 apps for the iPhone and, for many customers, this has become an equally important reason to buy the phone as the phone itself.  Since then, Google Android has developed a successful app market of its own, while  Blackberry and others are also having a go.

A number of these apps are payment related.  Transactions and PlanetAuthorize have both developed apps that enable merchants to accept payments anywhere, while Yodlee and Monitise have developed online banking apps.  However, Evans argues that these are all relatively obvious innovations.

The key, he argues, “is that with all these developers, all around the world, thinking about apps, it is probable that someone — perhaps many someone's — will come up with a killer app that will revolutionize payments”.  “Those who believe in a linear path from mobile phone, to mobile phone plus NFC, to mobile phone as payment device at POS are likely to get a rude awakening”.

The payment industry could experience the type of groundbreaking innovation that the computer industry experienced after the launch of the PC or the mobile phone industry experienced after Apple opened up for external apps.

http://www.pymnts.com/mobile-app-wars-impact-on-the-payments-biz-2/