Apple is wading into the mobile payments mix with the release of the iPhone 6 September 9. The chatter on tech blogs says the new phone will include near-field communication (NFC), which is the wireless frequency that allows devices in close proximity to share information such as photos, music, coupons, or credit cards. One potential use of NFC is it could be the tech needed to launch Apple’s version of the mobile wallet. For perspective, Google and Softcard (formerly Isis) mobile wallets came on the scene in 2011.
NFC is similar to Bluetooth technology, which allows devices to wirelessly connect, but it doesn’t require the multiple steps needed to enable a Bluetooth connection. With NFC, it’s a tap and you’re connected. Many Windows and Android phones already have NFC, but the iPhone 5 and previous models do not.
There are three types of NFC: Tag reader/writer, peer-to-peer, and card emulation. Similar to a QR code, the tag reader function transmits information from NFC-enabled tags to the mobile phone. This allows users to tap the phone to a flyer and learn more, tap a concert poster to watch the music video, or tap a grocery store kiosk to access special coupons. Peer-to-peer connects device A (maybe your phone) to device B (maybe speakers, headphones, or other phones) to share data like photos or music. But it’s card emulation that’s the big kahuna. This type of NFC uses a secure channel that randomly cycles security pins and allows users to pay for items by tapping their phone to an NFC-enabled pad.
Other mobile wallets have struggled with widespread adoption because in order for card emulation NFC to work, the phone must be capable and the merchant must have an NFC-enabled pad. Many merchants don’t. However, if Apple brings another couple hundred million users to the table, merchants might start adopting.
According to tech website VentureBeat, one of the main reasons Apple is putting the NFC chip in the phone is because the feature is crucial to selling in the Chinese market where people are accustomed to using phones to pay for public transportation.
Come back next week to CreditUnions.com for a line up of articles on upcoming trends in payments technology.