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Apple’s NFC iPhone ‘tipping point’ for mobile payments

Byron Connolly | Sept. 10, 2014
'Apple Pay' technology included in new iPhone 6 models

Apple has finally added near field communications (NFC) capabilities to its latest iPhone 6, which is likely to be a tipping point for increased uptake of mobile payment technology, says Telsyte analyst Rodney Gedda.

Apple's iPhone 6 and iPhone 6 Plus, announced overnight, both support 'Apple Pay', an NFC-based mobile payment service. NFC technology enables smartphones to communicate with other devices containing an NFC tag.

"It's a positive step by Apple and it will definitely give mobile payments a shot in the arm that it needs," said Gedda.

When users add a credit or debit card with Apple Pay, the actual card numbers are not stored on the device or Apple's servers. Instead, a unique 'device account number' is assigned, encrypted and securely stored in the secure element on a user's iPhone or Apple Watch.

Each transaction is authorised with a one-time unique number using the device account number, and Apple Pay creates a security code to validate the transaction.

Apple Pay is being supported by credit card companies American Express, Mastercard and Visa, as well as 220,000 merchants across the United States. It is unclear how many merchants and retailers in Australia will support the technology.

"The infrastructure is already built out with chips in cards ... there's already contactless payments in other types of [smartphones] but it's not something that's widespread.

"Apple can bring a user-friendly way to pay for a cup of coffee or newspaper with your phone, another step towards not having to carry cash around," Gedda said.

"The end points are already there, it's a matter of meeting all the ends essentially. You need an app on your phone, NFC in the device, the terminal and the bank to clear the payment and all that's already built out with NFC," he said.

Meanwhile, Eden Zoller, principal analyst, consumer at analyst firm Ovum, said Apple believes its new Apple Pay service will be the one that makes traditional wallets a thing of the past.

"Rhetoric to this effect is nothing new in the mobile payments space but so far, it has left consumers cold. But if anyone can make this happen, then it's probably Apple, although it will need strong partnerships," he said.

"It looks like many in the ecosystem think Apple can make mobile payments fly as it has launched with the backing of major card schemes, a clutch of banks and big name retailers.

"This is a promising start although not everyone will happy as the strengths of Apple Pay will make it highly disruptive for many existing digital wallet providers such as Google Wallet and those run by mobile operators, which in many markets are making slow progress," he added.

 

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