Apple Pay Boosts NFC Mobile Payments, But Is It Really a Better Mouse Trap?

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462120723Apple gave NFC (near-field communication) a long-awaited stamp of approval when it announced Apple Pay, the company’s new, proprietary mobile wallet app. The app is now available on NFC-enabled iPhone 6 and 6 Plus, two iPad models, and the soon-to-arrive Apple Watch.

Apple bestowing its “Midas touch” is extremely positive news for NFC and mobile payments, as the industry has been waiting for the verdict to come down for years. As I mentioned in an earlier post, NFC has been the proverbial benchwarmer for almost a decade, ready to launch us into the next era of payment technology but held back by multiple stumbling blocks. This seems to be the year the barriers are finally falling away.

But there’s more than one side to every story (just as there is more than one way to build a mouse trap) and with this one, there are also things about Apple’s approach that haven’t helped — and may hinder — widespread NFC adoption.

NFC

Near-field communication, or NFC, is a wireless technology that makes it possible for devices to securely exchange data — say, a phone and a payment terminal. For the communication to work, each device must have an NFC chip or tag, and they must be held within a few inches of each other.

NFC is useful for a lot of things. We mostly look to it for payments, but it can also transmit other information like contact details, loyalty points and discount codes. The purchases we make on our mobiles through BlackBerry World, Amazon, and other online accounts are technically “mobile payments.” But an NFC-based mobile wallet can take us to the next level, making physical wallets obsolete by replacing many of the things we carry around in them: cash, credit cards, loyalty program cards, and coupons.

Secret and Proprietary

Many NFC enthusiasts have repeatedly pinned their hopes on Apple, only to be routinely disappointed as Cupertino appeared to be completely ignoring the technology. This lack of public endorsement held the technology back for many years, as analysts and the media speculated that Apple thought NFC was a non-starter.

As it turns out, Apple didn’t harbor any such opinion. The company has been working behind the scenes for years to build Apple Pay and all the parterships behind it.

So, Apple’s legendary secrecy has already held NFC back. And even now, iPhone 6 and 6 Plus owners can only use the NFC with Apple Pay — no other mobile wallets, such as Softcard or Google Wallet.

And don’t expect any new NFC-powered apps to appear in the App Store anytime soon, because Apple has blocked third-party developers from accessing the NFC chip as well — at least for now.

Cooperation and Competition

While many banks, payment providers, operators, and merchants are already working with Apple on Apple Pay, they are simultaneously hedging their bets.

The biggest U.S. banks are already participating in Apple Pay. Worldwide, banks have been slow to adopt mobile payments, most likely waiting for a dominant technology to emerge. However, a few pioneering institutions have tossed their apps in the ring, and I think they’ll continue to build and support their own initiatives — CIBC Mobile Payment app, Barclaycard bPay, and CommBank App — either instead of or in addition to teaming up with Apple Pay or other wallet apps when the opportunity presents itself.

It’s a similar story with payment providers. The big three in the U.S. (American Express, MasterCard, Visa) are listed as partners, but MasterCard and Visa also maintain their own apps (PayPass and payWave), as well as partnership agreements with other mobile wallet solutions.

In the operators’ corner, Softcard (the recently re-branded Isis, a joint mobile payments venture between AT&T, T-Mobile, and Verizon in the U.S.) is working with Apple to get its mobile wallet included on future iPhones sometime in 2015. And though Apple Pay is U.S.-only for now, operators in the rest of the world may soon find themselves between a rock and a hard place, both selling Apple phones and offering their own competing payment initiatives. Telefonica and Vodafone are both in this position. Weve, a European joint venture, couldn’t take the heat.

As for merchants, Starbucks has ruled the roost when it comes to mobile payment apps. It’s participating in Apple Pay, but only allowing people to top up their Starbucks Card, the fuel for the company’s own mobile app, which keeps getting better.

BlackBerry and NFC

While Apple’s approach slowed industry innovation, BlackBerry was the first manufacturer to include NFC in our smartphones — in 2011. We saw the potential and wanted to help define the future of payments. Today, all of our high-end handsets have NFC, and we plan to keep the platform agnostic so it will work with any handset (as long as it has a secure element), any bank, and any operator, providing the secure foundation required for mobile financial transactions.

About Matthew Talbot

I am the Senior Vice President - Emerging Solutions at BlackBerry. I have extensive International Management, Sales and Marketing background in Mobility and Cloud technologies, Financial Services, Telecommunications, and Content in both a “Start-Up” and Public company environment. This includes stints as a senior executive at SAP, Sybase, Mobile 365 and others.

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