The State of NFC
No, I’m not here to discuss the fact that the Detroit Lions have their first 3-0 start since 1980, though kudos to them. I’m talking about Near Field Communications and particularly how it is used to make purchases. If you’ve ever swiped a badge to enter a building, had your pet injected with an electronic tag, or swiped your ticket to get onto public transportation, then you have used NFC. In essence, it involves two devices communicating information over a very short ranged radio signal. The smarter the devices, the more interesting the exchanges that can take place. With something like a badge, ticket or card, the communication is going to be, by necessity, rather simple, typically one way and typically simple bits of information. With something like a smartphone or computer, the possibilities are endless, a whole host of information being available and both devices being capable of altering what is sent based on changing needs.
Google and PayPal are squared off against one another in the NFC space and those are two big players, to be sure. Google is going to launch a phone with NFC payment options but and it has some major players lined up to help, but it’s still going to be starting off with some limits like only being in a single new model, only being on the Sprint network, only being usable at certain retailers, etc. But it’s still a serious bid by Google to get into the game in the US, where the uptake of NFC hasn’t been nearly as pervasive as in other countries like Japan.
Meanwhile, PayPal and owner eBay have been involved with a number of acquisitions and partnerships which, while not being as close to actually going live, have the capability of being more far-reaching and touching on more payment processing possibilities (say that five times, fast) than Google’s Wallet would out of the box.
Either company would seem to have a large leg up on anyone else entering the field (pardon the pun). For any other company to stand a chance at playing in the same arena for NFC mobile payments (i.e. paying with your phone), they would have to have equal name brand recognition, the ability to widely deploy large numbers of devices with NFC, capacity to handle purchases securely and an ability to establish relationships with merchants for rapid uptake of their payment processing system. Hmm…
Apple. Yeah, you saw that coming. First off, there have been rumors for awhile now that Apple was going to be dallying in NFC. First the iPhone 4 was rumored to be introducing NFC and now rumors are flying about iPhone 5, though admittedly tuned down . But consider, the iPhone is in widespread use and has the highest retention rates of any smartphone in the industry so it would seem that the smart money would be on pretty widespread adoption of the iPhone 5 out of the gate. Additionally, we’re seeing the iPhone move into more carriers in the US which is only going to increase its reach. Plus they’ve been processing payments as small as $0.99 for quite awhile now, albeit through their relatively controlled App Stores. And the process for signing up for what is essentially a merchant account to handle payment processing on the App Store is relatively pain free.
That said, a 30% cut of sales won’t fly and it might be hard to explain why I can sell you a Doubleplusgood Meal for only a 10% surcharge to Apple but end up with a 30% chunk gone for selling you the latest Lady Gaga track. That’s not to mention the hardware that would need to be in each location to handle that processing. Of course, the answer to that might be more iPhones or iPads. After all, Apple is already using them in their own retail stores, so why couldn’t a similar system be made available for merchants in their own stores? Set up an iPod Touch on the store’s wireless connection, secured of course. Run the merchant iOS app, loaded with the store’s inventory plus an ad-hoc item option to ring up random sales that might not be present in standard inventory. Walk around and let your patrons make purchases anywhere on the sales floor or at the main register, whatever you prefer.
Not Part of Apple’s Core
The catch to all of this is… this isn’t what Apple has been about. The App Store has typically been considered an avenue to encourage sales of Apple hardware, not as a revenue center in its own right. Perhaps that principle was Jobs-specific but I find it hard to imagine that his recent departure would result in a fairly big shift in focus. Still, Apple does seem to have a lot of the tools necessary. Or at least enough of them to give it a go.
Personally, I would like to see it happen through Apple. I already deal with them on multiple levels financially and don’t want to have to add to the panoply of companies who have my financial information. Then again, I suppose the same could be said of PayPal. Google… not so much. Wallet is new and Checkout has never really taken off. Regardless, here’s to an interesting online battle. May the best tech win.