Once again, Apple bypasses NFC in its new iPhones

Matt Hamblen, Computerworld (US)
13 September, 2013
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Maybe this wasn’t a surprise: Apple announced the new iPhone 5S and iPhone 5C on Tuesday, but neither comes equipped with an NFC chip inside.

Instead, Apple has opted for a unique new fingerprint sensor, the Touch ID, which allows a simple touch of a finger to unlock the phone or to make purchases in the AppStore and the iTunes and iBooks retail sites. It’s faster than typing a password.

Apple has once again dismissed the mobile wallet and data-sharing capabilities of near field communication (NFC) technology. Meanwhile, NFC is being used in dozens of new Android phones, such as the Samsung Galaxy S4, and in phones running the BlackBerry and Windows Phone operating systems.

Apple‘s decision is clearly the result a long-term competitive strategy based on a calculation of how the mobile payments business will evolve. The move serves to benefit Apple most of all, analysts say.

Touch ID will help push purchases to Apple’s content stores and the company’s decision to use that technology “says that Apple has decided that fingers are better than near field radios for [ensuring that] transactions are secure,” says Carl Howe, an analyst at Yankee Group. “If nothing else, consumers will understand fingerprints better.”

Leaving out NFC in the newest iPhone also creates challenges for Google Wallet and Isis, a consortium of wireless carriers that are trying to roll out an NFC mobile payment system nationally.

“I think NFC mobile wallet is a dead letter outside of Japan. It’s just not going to happen,” said Ezra Gottheil, an analyst at Technology Business Research, upon hearing of Apple’s continued rejection of NFC. “I think businesses will simply convert to barcode scanners that can read [QR, or quick response, codes on] smartphones. Or perhaps a Wi-Fi-based solution will be adopted.”

Jordan McKee, another Yankee Group analyst, says Apple’s decision will prove to be a “roadblock to any mobile wallet based on NFC that doesn’t have a QR reader option,” though he adds that NFC will eventually gain some traction in the US.

“Apple’s announcement is troublesome for NFC, which will get there eventually, but is not happening overnight,” says McKee, adding that Apple clearly didn’t see a business case for NFC.

“Neither [Isis nor Google Wallet] is popular enough for Apple and, more importantly, neither offers Apple any good way to monetise the addition of NFC in their devices,” says Jack Gold, an analyst at J Gold Associates.

Although Apple has so far not offered a way for its phones to connect to NFC reader terminals at stores and transit stops, the terminals are in wide use in some Asian countries. And use of NFC equipment is expected to grow more commonplace in the US by late 2015 as credit card companies push for in-store terminals that accept more secure smart chip card transactions and are compatible with smartphone NFC chips, McKee says.

Apple’s Passbook application works through optical scanning of QR codes, which allows people to, essentially, use their iPhones in lieu of tickets or boarding passes. Some analysts believe the use of QR codes could become far more prevalent for mobile wallet transactions in the next two years, while they project slower growth for NFC mobile wallets.

Gottheil and other analysts say that NFC may come to the iPhone in the next generation as perhaps another authentication system similar to what the Moto X now provides.

Carolina Milanesi, an analyst at Gartner, says Apple will probably add support for NFC at some point because it can’t avoid a universal wireless technology for sharing data with people who use devices that run other operating systems.

Apple in June said that AirDrop file-sharing technology would be included in iOS 7. AirDrop relies on Bluetooth and Wi-Fi, but not NFC. The iOS 7 operating system will be available for free on the iPhone 4 and later devices on 18 September and will ship in the new iPhone 5S and iPhone 5C.

“NFC will be added to iPhones when Apple figures out how they can either add value or monetise it,” Milanesi says. “For Apple, there is no immediate need.”

NFC also has a role in allowing authentication, Milanesi adds. “I doubt Apple could stay away from it.”

by Matt Hamblen, Computerworld

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