NFC-Based Mobile Wallet Feature Looking Like A Virtual Lock For iPhone 5

One new capability that is looking more and more like a certainty for iPhone 5 is Near Field Communication (NFC) mobile “digital wallet” support. A new ABI Research study entitled “Mobile Wallet Strategies” says that Apple will be a major player in NFC digital wallet services by the end of 2012.

“Apple will launch a mobile wallet product in 2012. Apple’s MNO [Mobile Network Operator] partners will allow Apple to offer their mobile wallet to consumers who have iPhones, regardless of whether or not the MNO has a competing mobile wallet,” says Mark Beccue, ABI Research senior analyst, mobile commerce and NFC, thereby factoring into the expected erosion of MNO mobile wallet market share.

The report forecasts that mobile wallet technology is coming, and while MNOs will provide the majority of NFC-based mobile wallets, their market share will erode between 2012 and 2016 as Google and Apple claim loyal users. “By the end of 2012, Google will prove that Google Wallet is a hit with consumers. By 2014, we will see Google Wallets supported alongside competing MNO offerings globally,” Mark Beccue predicts.

The report anticipates the number of NFC-based mobile wallet users will grow to 594 million in 2016. Growth will be fueled because 1) MNOs and OS players will flood the marketplace with NFC-capable mobile phones, particularly in the U.S., Western Europe, Japan, and Korea and 2) the business cases around merchant offers and interaction are compelling enough to pull mobile wallet ecosystem players in alignment, and by as early as 2014, MNOs will incorporate OS and OTT mobile wallets into their umbrella mobile wallets, slowing down the growth of truly independent mobile wallets from OS and OTT providers.

Daniel Shen and Adam Hwang, of the Taiwan-based IT industry-watcher site Digitimes agree, reporting that according to Taiwan-based smartphone makers, Apple and Microsoft to respectively make the iOS and Windows Phone support NFC in 2012, with the proportion of NFC-enabled smartphones to quickly increase from less than 10% currently to over 50% in two to three years.

Shen and Hwang note that Samsung, HTC, Nokia and RIM launched NFC-enabled smartphone models in 2011, , and without technological problems, the unsmooth development of NFC is mainly attributable to problems in standard specification, ecosystem and commercial operation, according to insider sources.

Nearly a year ago, in January, 2011, Apple published a job listing to its recruitment page seeking for an iPhone hardware test engineer with knowledge of RFID (a form of Near Field Communications used intensively in retailing and inventory control), and subsequently hired NFC expert Benjamin Vigier — formerly product manager for mobile wallet, payment and NFC at mobile payments specialists mFoundry and who also was a key player in development of both PayPal’s Mobile service and Starbucks’ barcode-based mobile payments service.

Apple has also reportedly filed two NFC-related patents in the past three years. The first one, filed in September 2008, was for concert, entertainment and sports ticketing. The second, in August 2009,was for peer-to-peer financial transaction devices. Apple has also patented techniques for incorporating an NFC antenna in a touch screen, and for NFC-enabled iPods, games controllers, TVs and iPhones. Clearly Apple is up to something with NFC technology, and there have been reports that the company is working on a mobile wallet feature that would tap into existing customer data and payment details collected for iTunes and App Store that would enable iPhone owners to wirelessly pay for goods and services. With millions of customers having already entered their payment details into iTunes to pay for music, apps and movie downloads, and a high degree of consumer trust in Apple, iPhone NFC is expected to be a major catalyst in bringing contactless payments to the mass consumer market.

Last spring, Sprint announced that it was entering a partnership with Google to launch Google Wallet, an application using NFC technology for Android phones. Google Wallet allows eligible Sprint customers to tap and pay while they shop, with Sprint the first carrier and Google’s Nexus S 4G the first phone to deliver this service.

Google Wallet is designed for an open commerce ecosystem, and Google says it will eventually hold many if not all of the cards you keep in your leather wallet today, but be able to do much more than a traditional wallet ever could. For example storing thousands of payment cards and Google Offers but without the bulk, along with your loyalty cards, gift cards, receipts, boarding passes, tickets, and eventually even your house keys, all seamlessly synced to your handset, with every offer and loyalty point redeemed automatically with a single tap via NFC.

Apple would also seem to have plenty of incentive to get NFC up and running on the iPhone as soon as possible. Business Insider’s Jay Yarow posted a report cited a Bernstein note projecting that NFC can add $ 15-$ 30 billion in incremental revenue for high end mobile companies, so Apple, with 20% of the high end mobile market, could end up with $ 4-$ 9 billion in extra revenue.

However, Apple presumably has has its reasons for waiting to hold back on rolling out NFC support on the iPhone, one possibly being that they want to bulletproof the security aspects as much as possible. NFC capability will exacerbate security concerns if your phone gets lost or is stolen, being as NFC is essentially just an embedded RFID chip interfacing with a reader. However, it can be also safely assumed that Apple will be working to incorporate ever more efficient and effective security safeguards into its mobile devices, possibly including measures like fingerprint recognition and retinal scanning, that will have to be satisfied before the machine will function, all of which takes time.

Hopefully, it will be good to go in time for a World Wide Developer’s Conference release next June.


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