Apple may be about make a big play with the iPhone 5 by installing a Near-Field Communications (NFC) chip that would allow it to process mobile payments.
The Wall Street Journal detailed the high-level debate Apple executives are currently having over whether and how to do just that.
In a recent special report, BI Intelligence explores the state of mobile payments, and analyses how Apple has a unique opportunity to own NFC and upend the mobile payments market if it chooses to enter it.
Here’s why Apple — and only Apple — could make NFC work:
- NFC essentially turns phones into wallets: NFC lets people pay for products at retail stores by simply waving an NFC-enabled phone at a receiver. Credit card companies and carriers are talking about it. OEMs are adding NFC chips to phones. Google built it into its phone app Google Wallet. Microsoft announced that Windows Phone 8 will support it. It is a potentially disruptive technology.
- But, NFC suffers from the chicken-and-egg problem: Retailers will not add NFC receivers to their point-of-sale systems until they see an economic rationale to do so — that is, until enough consumers are paying with NFC or want to pay with NFC. Meanwhile, consumers will not see the point of using NFC until there are receivers for it.
- And, there is no evidence that NFC is actually more convenient than cash or credit: Handing out cash at the register or giving out a piece of plastic and signing is very convenient.
- Apple represents a unique solution: With such a large network effect to overcome, and with such ingrained consumer habits, whatever mobile solution attempts to replace cash and credit needs to be at least as convenient to have a hope of breaking into the market. But if Apple threw itself into the market, and brought along big retailers with it, then NFC has a chance to suddenly reach critical mass all at once, and the mobile payments market could be in for a big disruption.
In full, the report:
- Outlines the two overriding strategic issues in the market.
- Explains the solution that are in the market and analyses their pluses and minuses.
- Shows why it’s too early to size the market (but why it will be big).
- Maps out the winners and losers.