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

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.

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  CardStar BookBook 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?

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