the past I have expressed doubt about Apple’s leap into the near field communication (“NFC”) payment field. When the new iPhone came out last fall I doubted the Apple would include NFC payment capability in the phone citing the ugly world of electronic funds transfers, fraud, and the bank like responsibilities and liabilities that could come with being involved in these transactions. There is no doubt that NFC payments would fall under the Electronic Funds Transfer Act for consumer protections, and that Apple and other non-bank entities who are preparing to step into the market in a bid to become your NFC operator would be venturing into a relationship with consumers based on unfamiliar legal rights, duties, and responsibilities.
What the hell are we talking about? Right now you have a credit/debit card that you use for point of sale transactions-like buying overpriced lattes, hipster skinny jeans, or petroleum based propellant for your combustion engine powered planet killer. Unlike buying an app on my phone, ordering a book from Amazon.com, or getting that custom Roman shade off Esty.com I must be physically located at the some terminal in the retailer to pay for my purchase. That’s the old way of doing things—or so PayPal would like you to think.
PayPal is a middleman, it pays who you want to pay, and charges some existing banking or credit institution. That’s what NFC retail customer service providers will be, competition. PayPal wrongly envisions a world devoid of point of sale transactions, with that kind of corporate mindset they can become the next RIM (lately we have seen Pay Pal start to back off this position).
No, seriously, what the hell are we talking about? NFC is a technology that allows a radio signal from your phone to communicate with a receiver to pay for purchase of Fair Trade tape dispensers. So instead of swiping your card you’ll tap your phone, or wave it, or maybe even leave it in your pocket, and your account with the NFC payment service would be debited. If the NFC service is not provided by your bank or credit institution directly, some other service will fill that role.
Who will be these NFC service providers? Telecommunication carriers like AT&T, Verizon, and Sprint, on whose networks the phones that will transmit the NFC signals run, are all developing NFC digital wallet programs. The charges for purchases would likely appear in a separate area of the phone bill. Paypal already runs this kind of service for online purchases, growth to NFC transactions seems logical. Retailers like Amazon, who are already serve as a kind of middleman for third-party vendors are also looking to get into NFC. And finally Apple and Google are each developing iwallet programs for NFC.
Why? NFC transactions, charge a fee for each transaction, multiple by the millions and billions of point of sale transactions adds up to dump trucks full of money for the service providers.
No, why would I do this? Because it’s easy, which is why Apple wins. You already have an Apple ID linked to a credit card to buy apps, movies, music and now groceries. It’s a natural evolution, and it’s going to be the easiest to use on your iPhone because Apple will make it so. Will grandma use it? No grandma writes checks, with a floral pattern.
When? Apple is not a first adopter. There are not yet a large number of point of sale locations that have the technology. So the answer is I don’t know. But when they do, your Apple ID may become a ubiquitous form of payment online, offline, and beyond (space and Jupiter and stuff). Apple would transform itself into Visa, collecting billions of small fees from the retailers. Or, at least, that’s would Steve Jobs would have done.