The iPhone 5’s lack of NFC integration, though it was overshadowed by Mapgate, surprised many in the wake of its launch last year. But the omission starts to make sense when you consider Apple’s trajectory in mobile commerce.
Apple’s tendency to hold off on standards that aren’t fully built out (previously 3G and 4G), come into play with the classic chicken and egg scenario that hampers NFCs penetration. But more so, there’s something about NFC that is very un-Apple.
One of NFC’s many promises is to streamline point of sale (POS) transactions. Besides the fact that this vision itself is arguable, easing POS payments is almost underwhelming. Put another way, speeding up Walmart’s checkout lines isn’t Apple’s M.O., nor in its interest.
Though it would be true disruption to a decades-old system of retail transactions (checkout aisles, cash registers, gum snapping shopgirls, etc.), Apple is thinking bigger. It wants to tear down those aisles altogether.
It’s already done this under its own roof. Among Apple’s retail innovations, it has removed the counter that traditionally sits between customer and merchant. If you’ve bought anything at an Apple Store, you’ve likely experienced one of these roving transactions.
This optimizes physical space and employee accessibility. It probably also influences yield management and revenue optimization in the way that less people walk out of the store, leaving the proverbial “abandoned cart” behind.
But the kicker came last fall when Apple took the additional step to remove the sales person altogether. The Apple Store app was launched to scan physical store items via iPhone, and pay via iTunes. This seldom-discussed app could be a glimpse into the future of retail.
In other words, Apple isn’t interested in entering the crowded battlefield of streamlining the POS with various mobile authentication standards. It’s rather moving towards a world in which the mobile device — where it owns the direct consumer touch point — is the POS.
Going beyond Apple’s walls, imagine wandering the aisles of Target while scanning any item to be processed and paid through iTunes. Implementation challenges aside (security etc.), this could represent a competitive edge for anyone in the hyper-competitive retail sector.
Further, the physical layout optimization mentioned above could be brought to big box stores. The bottleneck that is the traditional checkout aisle can be torn down in favour of a higher-yield system of decentralized transactions that happen throughout the store.
Of course, barriers like retail partnerships and entrenched interests (POS vendors) place this a few years out. Other questions loom such as the addressable market if limited to iOS users, as iTunes isn’t available to the growing ranks of Android users among others.
So it’s certainly bold, extending iTunes to tackle the $11 trillion offline retail market. But when has Apple ever been known to be anything but bold. As for retail partnerships, the company has shown it can play nice with industries it’s in the process of upending.
How it all comes together on the product end is also a question mark. Will there be individual branded retailer apps that tie in iTunes? Or SDK integration for third party apps like shopkick? Or perhaps one Apple Uber-payments app to rule them all?
Either way, the endgame here is unlocking and federating the holy grail of local advertising: transaction data. Beyond proving ROI on ad spend (implications for iAd), this is the basis for driving future purchase behaviour and loyalty programs (sound familiar?).
Besides the sleeping giant that is iTunes and its 400 million credit cards on file (look out for Amazon here too), Apple has already taken a big step in this direction; It’s called Passbook. Retail payments are next, and it could be the biggest market Apple has entered yet.
Michael Boland is a Senior Analyst at BIA/Kelsey covering mobile local media. He’s a frequent speaker at industry events such as WHERE, Ad:Tech, and Search Engine Strategies; and writes for leading industry sources such as Huffington Post, Street Fight, and Search Engine Watch. Previously he worked as a print journalist for business & tech publications including Forbes.