Commentary

Getting Closer: Will iPhone 5 Make NFC Real?

The prospect of waving your cell phone at a checkout card reader to make a purchase has been something akin to a sex dream in the mobile industry for nearly a decade or more. It doesn't take much thought to see the possibilities and interconnections that the mobile wallet allows, from a massive new sales revenue stream for someone in the chain, to back-end integration with targeted marketing efforts and CRM. Putting the phone into the purchase stream so directly has the potential to change the game for everyone in the mobile ecology.  

The technology for the Near Field Communications system that makes contactless payments possible and easily integrated with cell phones has been ready for a while. The widespread distribution of the technology -- and perhaps consumer comfort with the concept -- have not. And when it comes to getting NFC onto phones... well, the usual herd of cats that is the U.S. wireless industry has never been easily corralled. Note the ridiculously fragmented state of the 2D code industry.  

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Bloomberg reports today that Apple may be poised to jumpstart the NFC payment market by incorporating the technology into the next generation of iPhones. According to a consulting firm that claims knowledge of what engineers at Apple are working on, the next version of the device for AT&T is expected to sport NFC.  

Bloomberg is reporting that the NFC technology will likely be included in both the next generations of iPhone and iPads that are rolling out this year. 

If so, then this is good news and bad news. The good news is that it is Apple. No one polishes and popularizes existing mobile market concepts like Apple. From the smartphone itself to apps to mobile video to video chat, the company has gone mass market with early-adopter technologies that gadget geeks like me spent years simply diddling with. Imagine the influence of Apple TV ads demonstrating purchases with the wave of the iPhone. Imagine the number of retailers who would want to be on stage with Tim Cook or (one would hope) Steve Jobs for that rollout.  

The bad news is that it is Apple: the obsessive-compulsive control freak of modern American culture. Before anyone gets too starry-eyed about an NFC-enabled smartphone with Apple's hype machine behind it, let's not forget the iAd. Apple is not shy about insinuating itself into other people's models and creative processes - and driving business "partners" crazy. What level of control would the company exert on the m-commerce value chain? How much does it want to disintermediate the credit card companies? The Bloomberg reporting says that Apple is considering erecting its own payment system and has even prototyped payment terminals. The long-range plan is to integrate m-commerce with loyalty card programs and even targeted advertising. Apple would be the intermediary for a range of relationships and payment systems that have a number of incumbent players with billions of existing investments to protect.  

Even for Apple, dominating the contactless payment world is a tall order. The math is tough. Whatever Apple's iPhone and iPad sales success, the devices still represent a small sliver of the market. And Android is gaining fast. The turf war over apps and mobile OS we have seen in the last year is nothing compared to what we will see if NFC payments get tossed into the mix. Google's Nexus S from Samsung already sports NFC technology, and Android is in a much better position now than it was a year ago to marshal support among companies that Apple pisses off.  

Like everything else in the wireless industry that requires standardization to take flight, NFC payment is going to take a good long time to proliferate. I am still standing regularly behind folks at the grocery check-out just figuring out how to use their debit card.  

The possibilities for NFC payment on phones are delicious for marketers, however. Last week I tested Starbuck's payment card app that lets me debit my card for a purchase straight from the iPhone. Imagine if that process was made several steps shorter by embedded NFC. Then imagine the data tied to an instantly redeemable coupon for an Apple Fritter (oh, I love their fritters) that popped up through a mobile alert? Or if that data is tied to in-app ad serving -- and knows not only what, but where and when I buy? And knows that I am a sucker for a fritter? How much would you pay (or bid?) for the iAd that targets me based on those parameters -- and can hit me as I approach the purchase point?  

In some ways, NFC is less a game-changer than it is the end game that digital media has been aiming for in the last two decades. To take the marketing technologies and targeting capabilities of digital media and put them into the consumers' world as they live, decide and buy, is the fundamental power and promise of mobile.  

But a part of me hopes the wireless industry's endemic fragmentation, in-fighting, and allergic response to standardization will keep this next great age at bay for a while. Because I really can't resist a fritter.

2 comments about "Getting Closer: Will iPhone 5 Make NFC Real?".
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  1. Kris Olszewski from Independent, January 25, 2011 at 2:24 p.m.

    Hmmm I imagine there will be lots of people with holsters ready to jump on this bandwagon and I personally have been waiting patiently for this functionality, my only concern is what happens when your iPhone "walks away" or gets lost?

  2. Mike Patterson from WIP, Inc., January 25, 2011 at 7:53 p.m.

    Righty-O, this trend will start to take over this year and beyond if we can get past some of the end-user hesitancies...and who better than Apple to get the user past those hesitancies.

    That and this was one of my predictions for the year:
    http://mikepatterson.posterous.com/look-out-for-the-next-two-years

    Nice post!

    Mike Patterson
    @mpattyfly

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