NFC: While the mainstream obsesses about the last inch, Apple focuses on the horizon

14 September 2012

That’s what transpired on Wednesday, when the iPhone 5 launched without NFC. Pretty much everyone was sure Apple would join the NFC game with its own silicon in the handset and take it to ubiquity, and I bet there are many who are rueing their decision. Suddenly the immediate future of NFC is in doubt: network operators’ plans to grab a slice of payment transactions compromised; competitor handset manufacturers hopes for Apple to adopt a common agenda trashed;  Visa, Mastercard, Android and Google’s assumptions that NFC would quickly become ubiquitous undermined; and numerous mobile payment platform start-ups banking on NFC needing explanations for investors...

When the multiple implications of Apple’s snubbing of NFC sinks in, zillions will be wiped-off valuations and share prices of NFC-dependent business models, as paths to profitability, liquidity or plans for new revenue streams dissolve. Why? If Apple, the leading handset manufacturer of smartphones in the Western world (and beyond), chooses not to include NFC in what will probably become the fastest selling device in history, will retailers and merchants still invest in NFC point of sale equipment when their most valuable customers can’t use it?

As I mentioned in my guest article for Forbes.com and the accompanying Nucleus thought-piece last May, NFC alone won’t be changing payments.

Apple has several reasons for this strategic, competitive act of non-cooperation and is using its heft extremely cleverly. NFC is not the only ‘last inch’ technology: Bluetooth and RFID have been around for years, with the latter highly effective on smart cards like Oyster and sQuid; Apple’s own Passbook works well for tickets and coupons and will also do for now; while biometrics are ‘real’ today and offer superior security and usability. 

There has been far too much emphasis on the last inch for contactless payments, but Apple has shown you need to keep your focus on the horizon. The real battle for a share of transaction value will be around the payment platform itself and who can create a viable competitor to the bloated bank and EMV systems. Everything else is just a delivery method that retailers have to invest in. I bet Apple understands that.

Peter Matthews
Nucleus Founder & CEO
September 2012

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