Over the last several years, I’ve written for Mercatorclients about what Apple’s up to with near field communications(NFC) and even speculated that a business case (one that hasnothing to do with payment transactions) can be made for thehandset manufacturer’s inclusion of NFC in the iPhone and even iPadproduct lines.
I still believe that’s the case. But, ofcourse, payment at the point of sale is a huge source oftransactions and the foundational application for NFC. Recent newsabout Gemalto and Apple working together to produce portable SIMchips, presumably for GSM-based networks, that also provide NFCpayment capability affirms Apple’s interest in payment relatedrevenues.
Apple is in a great position to driverevenue by simply charging an access fee to its NFC-basedcapability. They could charge merchants one fee for “app” access tothe chip if used simply for a loyalty application. Theye mightupcharge the merchant another fee if payment capability is embeddedor it could simply charge each card issuer a fee for access to thesecure element component on the NFC chip.
This approach is congruent with how Applealready charges a fee for hardware vendors accessing theproprietary iPhone connector.
Apple’s revenue model could get far moresophisticated, going well beyond simple access to the hardware.It’s also clear that Apple is looking to extend their transactionand subscription services. The company’s building an enormous datacenter in North Carolina which is hardly about better iTunesdownloads. It’s about cloud-based services and, up in that Applecloud, could be a transaction counter for NFC usage, a paymentcredential provisioning platform (Trusted Security Manager or TSM)function, and even an authentication service available toconsumers, FIs, card brands, and merchants.
Apple’s partnership with Gemalto makes hugesense as the firm manufactures SIM chips by the millions forwireless telco applications and has been at the forefront of NFCdevelopment. Given its global manufacturing and services reach, itshould be able to support any vision that Steve Jobs and his teamimagine.
NFC can be used to do some simple convenientthings like secure P2P payments, quickly configure higher speed,longer range Bluetooth communications sessions to other devices andapplications, or to do a “tap and check-in” to some in-storemerchant service. But payments and authentication are where theaction lies.
Should Apple produce an NFC-equipped iPhone5 next year, it will be very interesting and important, to see howthe Google Android community responds. The NFC equipped smartphoneis a logical avenue to bring biometrics into the authenticationprocess. With all of that hardware, security could become quitestrong, cementing the smartphone as the top authentication deviceat both the POS and for online transactions. Use that camera to doa retinal scan.
At that point, does the card present/cardnot present distinction still exist?
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