Apple is prepping its next iterations of iPhones and iPads to come equipped with near-field communication (NFC) technology as it explores new payment modes for consumers and open up new advertising revenue streams to augment its iAd initiative, according to a report.
Bloomberg reported Wednesday that Cupertino-based Apple is planning to make available services for customers to pay for purchases using its next-generation smartphone and slate devices once the devices are equipped with NFC chips.
Richard Doherty, director of technology consulting firm Envisioneering Group, citing engineers working on hardware for Apple, told Bloomberg that NFC chips are to be embedded in the next iteration of iPhone devices for U.S.-based carrier AT&T, as well as the iPad 2. Both products are likely to be introduced this year, he added.
NFC allows data to be sent wirelessly over very short distances of around four inches, the report stated. It sends data from a chip inside a device, such as a smartphone, to a payment terminal or to another device.
This is not the first time Apple has been said to be working on NFC. Last August, the company reportedly brought in NFC chips from NXP Semiconductor to perform viability tests on an iPhone prototype. Additionally, it also hired NFC expert Benjamin Vigier from mFoundry as mobile payments product manager.
The Bloomberg report pointed out that the time is ripe for Apple to jump on the NFC bandwagon. Richard Crone, who leads financial industry advisory firm Crone Consulting, said any potential NFC service would be able to tap user information already on file, including credit card numbers, iTunes gift card balance and bank data.
This would position Apple's service as an alternative to programs offered by existing players such as Visa, MasterCard and PayPal, added Taylor Hamilton, an analyst at consulting firm IBISWorld.
With NFC on hand, Apple would be able to muscle in on the US$6.2 trillion goods and services payment market in the United States, Crone said. NFC, which is tied to user bank accounts, would also help cut Apple's and its retailers' costs by eliminating credit-card processing fees levied on every purchase from its iTunes store, he added.
New revenue streams
Furthermore, the technology would help improve Apple's mobile advertising platform iAd, which was launched in July 2010, in areas of ad delivery and value-add, Crone noted.
He suggested that NFC would enable the iAd network to send targeted ads depending on where customers are spending their money. This, in turn, could "double or triple the ad rates" Apple currently charges, he added.
To speed up NFC adoption, Doherty also mentioned that Apple is prototyping a payment terminal that small businesses and mom-and-pop shops could use to scan NFC-enabled mobile devices. Cupertino is considering heavily subsidizing the terminal or even giving it to retailers to "rev up" sales of its iPhones and iPads, he told Bloomberg.
Mobile heavyweights Google and Nokia had earlier also announced similar initiatives to push NFC to consumers.
Google said it had baked in NFC capabilities in its Android 2.3 mobile operating system, codenamed Gingerbread, when it launched its Nexus S smartphone in December last year.
Finnish phonemaker Nokia, which had been trying to push NFC adoption for years, also previously indicated that all new smartphones launched in 2011 will come embedded with NFC chips. The plan was revealed in June 2010 by then-Nokia executive vice president Anssi Vanjoki, but no further details had been disclosed. The executive, who was the company's mobile solutions head, left the company in September 2010.
Earlier this month, Jeremy Belostock, Nokia's head of NFC for its devices unit, touched on the potential of NFC in an interview with Finnish broadsheet Helsingin Sanomat. He said: "NFC will possibly be as big an advancement in mobile phones as was seen with the current touchscreen technology."
For this to happen, though, the company is looking to expand its partner network to include more application developers as well as banks and credit card companies, he added.