A fool's errand: iPhone 5 skips the self-checkout line (and NFC)

A fool's errand: iPhone 5 skips the self-checkout line (and NFC)

Summary: Apple today announced an evolutionary upgrade to its flagship iPhone handset, but it left out NFC hardware. In the process, the world's most valuable company left billions of dollars in potential point-of-sale commissions on the table.

TOPICS: Apple, Hardware, iOS, iPhone
Don't try waving your iPhone 5 in front of an NFC reader like this one at Staple. It won't work. Jason O'Grady

Apple today announced the iPhone 5 with an evolutionary set of hardware specs including:

  • 1136 * 640 pixel Retina display
  • Apple A6 processor
  • LTE/4G radio
  • 720p front FaceTime camera
  • 3 microphones
  • improved speakers
  • New 9-pin port (don't get me started)

But Apple left one key hardware feature out of its next generation handset: Near Field Communications (NFC).

NFC hardware allows a smartphone to be used as a payment method simply by waving it in front of a receiver (like the one at Staples, pictured above) and entering a PIN. NFC is the future of mobile payments and has the potential to turn your phone into a digital wallet.

(For more on digital wallet replacements read my reviews of CardStarBookBook for iPhone and Geode.)

As I wrote two weeks ago, Apple's NFC snub puts it another year behind Android devices that already contain NFC hardware (like the Samsung Galaxy SIII) and will cost Apple dearly in terms of revenue lost in retail stores around the globe. Maybe Apple will come to its senses and build NFC hardware into the iPhone 6 in September 2013?

By then it will probably be too late. 

While NFC and mobile payments have yet to reach critical mass in the U.S., Apple is one of the few companies that has the potential to push the technology into the mainstream. Including NFC hardware would have enabled mobile commerce for Apple's 435 million active iTunes account holders who could have simply used their iPhones and iTunes account to pay for everything from gasoline to groceries. 

A fool's errand: iPhone 5 skips the self-checkout line (and NFC) - Jason O'Grady

The other companies that have the potential to bring NFC into the mainstream include Google (which includes NFC in its Nexus 7Google Wallet and Android), eBay and PayPal. Amazon loathes NFC because as a company it competes with bricks & mortar retailers and FaceBook doesn't make hardware, yet.)

iTunes could be accepted everywhere bank cards are accepted netting Apple a tidy profit from every transaction, just like VISA, MasterCard and the big banks do today. But Apple chickened out and played it conservative. The growth of m-commerce is undeniable and skipping NFC in the iPhone 5 means that Apple will not embrace the growing trend for at least another year. 

The iPhone 5's lack of NFC hardware also severly cripples Apple's promising PassBook app, which ships in iOS 6 on September 19. Instead of being a payment method, PassBook will be little more than an app to collect loyalty cards and boarding passes -- and I already have CardStar for that.

It's a calculated move on Apple's part, but a big mistake in my opinion. Apple could have become the industry leader in mobile payments; but it decided to play it safe and cede that market to others.

Update: Apple Senior VP Phil Schiller has chimed in on the iPhone 5's lack of NFC, saying:

It’s not clear that NFC is the solution to any current problem...Passbook does the kinds of things customers need today.

While I agree that NFC isn't the solution to a current problem for most people, but that's not the point. Apple's iPhone 5 is the new reference platform for the next 12 months. So it's not as much about NFC's penetration today, as where it will be in a year from now. Will the iPhone 5 (sans NFC) still be cutting edge next summer when it's at the end of its lifecycle?

Topics: Apple, Hardware, iOS, iPhone

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  • Don't forget Windows phones

    Most, if not all Windows Phone 8 handsets will have NFC. This will differ from Android as only the high-end models have/will have NFC for Google Wallet.

    So really, the opportunity is in Microsoft's hands. They just have to capture more of a marketshare, and this might just be the feature to make that happen.
    • This feature?

      I'd be pretty worried if MS sold phones because they could act as credit cards.

      For now NFC is a bit of a gimmick. We love it because it's an impressive technical development and there's also the flashyness of getting your half grand phone out - same as dropping AMEX. In an ideal world it's perfect- fast, efficient, futuristic even. But there are drawbacks - lack of authentication being the main one, additionally people may not like the idea of flashing their phones around in some areas. I think the snob factor will push it forwards initially, how it goes when your £100 payg can do it is anyones gues. For now it's completely unpredictable how it will go.

      The one thing we can be sure of - apple didn't exclude it because they couldn't do it. It was a concious decission. Of course we don't know why, but there's a couple of options;

      Firstly that they are planning to expand their easypay system outside if their retail stores as an alternate route for itunes payments. Although possible, i don't see this as likely; it's clumsy and seeimgly doomed to fail.

      Second it could be their business model; they sell a brand, not just the device. This makes their brand image perception key in their strategy. I suspect they are waiting for others to take the plunge and test out any security issues; the last thing they want is the headline "apple phone credit card fraud". It's the same reason they shy away from most financial services - the only one being online finance (even instore finance was pulled to remove the sales aspect) they don't offer insurance as part of their "complete solution". That's because these services can create thousands of unhappy customers. Let's face it their only financial service experience is in a very tightly controlled ecosystem, not out in the wild.
    • What's the big deal?

      How secure is this technology? What if a person has a device that can retrieve information from your NFC credit card or mobile phone by touching your wallet or mobile phone?
      • Not secure!

        I was at DefCon this year and saw Charlie Miller's talk on NFC security. Two different Android models, different multiple vulnerabilities. Complete ownage. I applaud Apple for leaving it out.
        Tom Fisher
    • I don't think people are going to trust

      A Microsoft powered device, especially version 1.0, with their money.

      Do you want to be a beta tester? Didn't think so.
      • Why not? People don't mistrust MS

        beyond the ABM lunitics. And look at the people that paid Apple to beta test Siri, or Google's first attempt at NFC.

        People will use the feature based on what they want, and not who's phone they are using.

        Nobody is going to say "Hmm, I really like this NFC thing and will buy a phone specificlly for that. I'm going to get the Android phone because I don't trust MS".

        Not a thought most will entertain.
        William Farrel
        • Thanks for the diagnosis

          Now I know my diagnosis: ABM lunatic (whatever that means)

          Lunatic, or not, I would never, *ever* trust anything from Microsoft. The kids there are just plain incompetent.
          • ABM ==

            "Anybody/Anything But Microsoft".
    • Even more than that

      I think people forget that MS put NFC not only as a means for payment system. There are using the technology to provide other wireless solutions.
  • NFC is 5+ yrs away

    There is no infrastructure in place for NFC.

    In the US, NFC is a solution looking for a problem. Credit cards are simple and just work.
    • Fair call, but...

      You're right, there aren't many pay-swipe solutions out there at the moment. But I think the technology has a place - your phone could eventually replace not just your credit card, but every card in your wallet. Given that even the average wallet is quite fat with all the various discount cards, IDs, credit cards, library cards, etc etc, this would be quite nice indeed.

      It'll be a slow five years, but it'll be worth it.
      • Not a snowball's chance in ...

        ...you know where...that I will EVER "...replace not just your credit card, but every card in your wallet."

        If I can't turn off NFC in any future phone I may get...then I will never be getting any of those phones.

        This is a seriously BAD use of a cell phone.
        • Bad?

          First...NFC is huge in Asia. It's not like we would be first in doing this. It would be pretty simple to take proven tech from the Asian markets, and implement it here. Plus it gives us a market to look at to gauge fraud and whatnot. Second...I don't think you understand how NFC works (which is maybe why you're scared of it). It's done through apps that utilize the NFC hardware built into the phone. Have a phone with NFC hardware and don't want to use NFC? Don't download and plug your info into a NFC app.

          This is a manageable feature and if there becomes a demand in the market for it, hardware providers would be stupid NOT to include it in their hardware. Regardless of what the tinfoil hat crowd thinks.
    • Key point tech heads miss

      The number of non compatible competing methods are crazy right now. Few (as in less than 0.01%) of merchants accept NFC digital wallets so what really is he loss?

      The tech is not ripe yet. Though I see it great for quick share like the SIII does. But wallets? Give it another 12-18 months.
      • You left out the bit . . .

        . . . about how it hardly matters because, in many if not most countries, there is almost nowhere to use NFC. I think Apple is smart to sit-back and wait and see if NFC takes-off. If it does, and does so very quickly, then they can add it to the next iPhone and hardly be far behind the market.
        • Woops, this should have been attached to the comment below

        • I agree, I havent seen any NFC payment options around me

          and I've been looking. A neat idea, but Apple won't support it until it is ubiquitous.
          • Apple will support it the day they can get a percentage of the payment .

            Like they do with App store purchases.

            Until then, is there really any money in it for them to worry about supporting it?
            William Farrel
        • The thing is that everyone else will say when Apple does integrate it

          is that they had it FIRST, so they can have bragging rights.

          What's funny is that some of these Android users are still bragging about Flash support and Micro SD.

          Aren't some retailers making their own app where the customer scans the bar code on their iPhone ala Apple Store app, so the customer is basically performing the checkout as they buy things to circumvent having check out counters? Apple does pretty well without NFC at the Apple Store.
          • SO what if they were first?

            If they don't many any profit out of it, what's the point?
            Who cares?