Two weeks ago, I interviewed David Eads, the head of product marketing for Kony Solutions, a mobile application vendor to Fortune 500 companies, on the prospects for near-field communications (NFC), a technology that securely transfers low levels of data over short distances.
The next year or so was expected to be a coming out party for NFC, he said. The key event was to be the inclusion of NFC in coming versions of the iPhone. Like so many other things, the seal of approval from Apple was to catapult the category from extremely promising to extremely lucrative.
Multiple reports-including this one at The Independent-said that Apple isn't including the technology in the iPhone 4GS or 5.
That doesn't mean that Apple doesn't believe in NFC. Indeed, it may mean quite the opposite. Apple, The Independent wrote:
... told the operators it was concerned by the lack of a clear standard across the industry. Yet Apple is understood to be working on its own NFC proposition, which would link payments through iTunes. It hopes to introduce the technology in a handset likely to be released next year.
At first blush, the fact that Apple apparently is bypassing NFC for now doesn't seem like too big a deal, or a sign that the company is souring on the technology. But the opposite may be true. And, if it is, things will get a bit more interesting quickly. Indeed, the value of the market makes it unlikely that Apple is not getting its ducks in a row. This is big stuff, according to Eads, who starts by discussing the overall payment industry and then describes where NFC may initially fit in:
According to the Federal Reserve in 2010, there were over $40 trillion in payments made in this way. One percent of mobile payments is $407 billion dollars worth of transactions. At a 150 basis points of interchange-meaning 1.5 percent fees that merchants have to pay for processing-everybody is jockeying for about $6 billion.
We are talking about $6 billion fees that retailers can potentially reduce. That revenue is going to banks and credit processors right now. As mobile payments changes the market, all those relationships are up for grabs. It will go from one type of processing firm to another, or go away. That's what is in play. And it is not going to stop at one percent. There is a huge amount of money at stake here.
Here is more on the value question from The Independent story:
Consulting group Frost & Sullivan believes payment values via NFC will hit 110bn by 2015 and Google chief executive Eric Schmidt recently said the technology would "revolutionise payments".
So NFC may be the subject of quite a battle. In this interpretation, Apple's reticence-after, according to Eads, having sent strong signals that it was going with NFC in the coming versions of the iPhone products-could be a tactical move aimed at carving out a bigger piece of the market. This is a fluid market as Apple and other players position themselves and, at least according to the Bank Info Security piece, the industry waits to see if the global Europay, MasterCard, Visa (EMV) chip standard makes it across the Atlantic.