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Better Late Than Never...Apple Gets Involved with NFC

Apple may be arriving to the party fashionably late, but if its recent patent activity is indicative of its future plans, the company is readying itself to join the list of device manufacturers offering NFC smartphones. Last week Apple was granted a patent for “Parental Controls,” which initially sounds like a fairly innocuous, ho-hum development. Upon closer examination, however, this patent is actually related to a virtual wallet application, which, not surprisingly, is called “iWallet.” This patent, in conjunction with many others similar in nature granted to Apple over the recent past, indicates that the company is establishing groundwork to enter the contactless payment game.

In typical Apple fashion, no definitive announcements have been made, but this most recent development suggests that the company could formally launch its NFC entry with the iPhone 5 expected to reach the market later this year. While a new entrant to the NFC smartphone market is generally not groundbreaking news at this point in time, a NFC-enabled iPhone is a clear exception that would generate considerable media buzz.  If Apple does in fact include NFC in the next generation iPhone, we believe it has potential to be a watershed in the evolution of contactless payment and e-wallets for several reasons:

  • Apple has clout with the MNOs (AT&T, Verizon, etc.) unlike any of its competition due to the desirability and hugely successful track record of the iPhone.  While other tech giants such as Google have faced considerable headwinds in their early attempts to bring NFC payment to the masses, Apple will likely encounter fewer barriers because of the significant recurring revenue its devices bring to MNOs. For example, it is difficult to imagine AT&T or Verizon will block iWallet from operating on devices using their networks, a tactic both operators used with Google Wallet—as doing so could jeopardize their relationship with Apple.
  • The iPhone is the top-selling smartphone in the world. While robust shipment volumes alone will not precipitate enterprise investment in/consumer adoption of contactless payment, establishing a critical mass of NFC devices is an important part of this evolutionary process. As the saying goes, there’s “strength in numbers,” and an NFC-enabled iPhone has potential to sell 80+ million units in its first year on the market.
  • Apple announced its iTunes store had over 200 million registered users as of Q1 2011. Each of these accounts has a credit card tied to it, which Apple could theoretically leverage to facilitate an introduction of a mobile payment solution.
  • An important factor impacting consumers’ willingness to use contactless payment is the ease and intuitiveness with which they can pay with their smartphone instead of their wallet. A well-designed, intuitive-to-use software solution and graphical user interface are key variables in the ease-of-use equation, and are areas where Apple has traditionally excelled. If Apple does ultimately offer a contactless payment solution, we expect it will be as intuitive and easy to use as its other products.

As NFC industry observers, we believe Apple’s entry into the NFC smartphone market will be the kick-start that the NFC industry needs. Not only does the company represent the last major manufacturer yet to support NFC, it also has a fiercely loyal user base that would significantly increase awareness for the technology almost instantly. Taking into account all these factors, we think Apple has the potential to bring NFC and contactless payment to the masses like no other company possibly can.

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