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Why Would Apple Wait ‘n’ See with NFC?

“Will the iPhone 5 have NFC?” This is by far the most frequently asked question we hear when speaking with large enterprises considering NFC adoption. Many assume Apple’s near-term support of NFC is inevitable, as if it is a required response to competitors such as Samsung, RIM and Nokia integrating NFC into a number of handsets already available today.  Certain NFC-related patents filed by Apple over the past two months have further boosted the belief that an NFC-enabled iPhone is inevitable.  VDC has considered this issue carefully, and while we find it virtually impossible to make a high-confidence prediction about Apple’s intentions, we have identified a number of reasons Apple could continue in its current holding pattern, or perhaps completely pass on NFC:

  • Apple may buy into the PayPal paradigm: For payments, the need for hardware (or anything tangible, including cash, checks or cards) is passé—cloud-based payment is the future.
  • Apple could be taking a “wait & see” approach: Merchants’ infrastructure and application investment is a critical factor that will determine whether NFC will gain traction in B2C, consumer-facing applications. At present, investment has been lacking in most regions.  Apple is unlikely to put technology into its iPhone—which are generally replaced every 24-36 months—that consumers are largely unable to use currently.
  • Crucial issues regarding secure elements have yet to be resolved: Where will the secure element reside? Which stakeholder(s) will own it? These questions are critical for applications that have security requirements—payment being an obvious example. Apple could be waiting for these issues to be resolved before making its move.
  • Some believe NFC is “a technology in search of a value proposition.” For all of the many applications NFC can support and enhance, none really depend on it entirely—they can be enabled in other ways. If Apple falls into this category, the company may never support NFC…

Considering the NFC-related patents the company was recently granted, its massive database of iTunes accounts (over 200 million as of Q1 2011), and the credit card information associated with those accounts that it could leverage to enable a payment application, we think that Apple will ultimately get involved with NFC. However, whether Apple does so with the iPhone 5 or 6, or perhaps another device entirely is anyone’s guess. The iPhone 5 introduction is expected sometime in fall 2012, so until that time, there will be no certain resolution to the ongoing mystery that is Apple’s position on NFC. 

The uncertainty surrounding Apple’s stance on NFC is just one of many complex issues faced by stakeholders in the nascent, but rapidly growing, NFC market. To address the numerous and multifaceted questions and concerns enterprises have regarding NFC, VDC is launching a new research program called Voice of the Customer: Near Field Communication. This multi-part series will identify and analyze key trends in the NFC market from the perspective of B2C enterprises, NFC hardware/solution vendors and consumers, and will draw on extensive primary research of enterprises and consumers currently using NFC. Please contact us to learn more.

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