What the iPhone 5 could mean for mobile payments: nothing yet

Whether or not the iPhone 5 is built with NFC technology, it probably won't make a difference for mobile payments just yet.
Written by Rachel King, Contributor

Rumors have been swirling all year that the iPhone 5 (or whatever it might be called) will ship with NFC technology onboard. However, lately that story hasn't had much fuel.

That's probably because it doesn't matter at this point if the next-generation of the iPhone has NFC or not.

At one point, it seemed as if NFC technology was going to be the de facto feature to enable mobile payments on smartphones. That certainly caught on fire (for a brief time) earlier this year when Google Wallet was announced. That digital payments platform utilizes NFC, but only one smartphone is ready: the Samsung/Google Nexus S.

Sure, there will be other solutions that would likely open up to iOS once it has NFC, such as the Visa and Isis digital wallets. But those won't become commonplace for a considerable while yet either.

As awesome as the concept of mobile payments is, the truth is that hardly anyone is ready for (or even knows about) NFC yet.

Laura Chambers, senior director of PayPal Mobile, warned during a panel discussion at GigaOM's Mobilize 2011 conference last week that that merchants have already been burned by the experience of paying for terminals to support NFC chips on credit cards, and only a miniscule portion of the population is actually using them nationwide.

“We found that it’s important to have a solution that is broad and flexible,” Chambers said, adding that “trying to push something new on to them was not going to work.”

Square’s chief operating officer Keith Rabois argued that NFC simply will not become mainstream in the United States as the culture of swiping credit cards is simply too ingrained in our consumer culture.

Of course, there are other, simpler ways of making mobile payments on a smartphone. For one, there's are the options from the likes of Square, VeriFone, and Erply, among many others, in which merchants can simply attach a module for swiping credit cards that connect with apps on tablets and smartphones.

The easiest way would be to go the gift card route like Starbucks. If you haven't used its app, Starbucks lets users tether a gift card that can automatically debit a person's credit card. Customers open the app with a pin number -- and the app will close fairly quickly without activity and ask you to log in again -- and then they present a barcode that can be scanned and debits from the gift card. It's a dumbed-down version of mobile payments, but it certainly works -- at least for major retail and food chains.

However, all of these options already exist with the iPhone 4, the iPad, as well as Android smartphones and tablets. Thus, the iPhone 5 wouldn't be much of a stepping stone unless Apple really comes up with something totally new (which is always possible).

Now, the iPhone 6 -- that could be the generation where it matters what route Apple decides to go with mobile payments.  If NFC does grow more roots with support on more smartphones and more terminals available nationwide within the next year, that would be the time where Apple would need to install NFC on its mobile devices.

Some analysts already predict that 2012 will be a major transitional point in the world of mobile payments. Naturally, the cynics argue that is said every year, but at least this time the technology and the push for digital wallets are more on track.

Be sure to check back on Tuesday, October 4 starting at 10 am PT / 1pm ET for ZDNet's live analysis of Apple's Let's Talk iPhone event!


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