With Google Backing NFC, Apple Can't Afford to Pass on the Technology

Updated. As smartphone makers announce more new models supporting NFC over the next few months, it will only add to the anticipation building over whether Apple will support NFC in the iPhone 5.

As it stands now, nearly every major smartphone maker and, more importantly, most of the major smartphone operating system providers, have publicly disclosed their intention to support NFC. That includes Nokia and the Symbian operating system it controls, Research in Motion for the BlackBerry phones and OS and, of course, Google with its Android platform. The only important smartphone operating system providers that have yet to make known their plans for adoption of NFC are Apple and Microsoft.

And sources tell me that Microsoft definitely has an active NFC program underway and that future versions of its Windows Phone smartphone operating system likely will support the technology. Presumably, Windows for PCs will follow with NFC APIs built-in.

But Microsoft ceased to be Apple’s chief rival long ago. Google has assumed that role, and as we know, Google has expressed enthusiastic support for NFC. That will not change with the top management shuffle announced late last week that saw Google CEO Eric Schmidt–who publicly endorsed NFC in November–step aside in favor of Google co-founder Larry Page.

While NFC-enabled Android apps are just now starting to appear, it’s becoming increasingly clear that NFC is key to Google’s strategy to try to grab a big share of the anticipated mobile-advertising bonanza. As more and more Internet browsing and searches move to smartphones, Google is naturally keen to try to extend its Web advertising dominance to mobile phones. And NFC could help it accomplish that by enabling the Web giant and its advertisers to reach consumers where they are the most valuable–at or near the physical point of sale. That’s where the vast majority of consumer purchase transactions take place.

As part of that effort, Google is building an NFC-based mobile wallet aptly nicknamed Cream, which it hopes will smooth the transition for consumers and merchants, and banks and other payment service providers, to conduct commerce on mobile phones, as NFC Times earlier reported.

Given this, Apple, which is seeing both its market share and market cachet eroded by Android, can ill afford to pass on NFC again this year. That would give Google and such major Android handset makers as Samsung, LG, Motorola and HTC more than a year head start in marketing NFC. The short-range wireless technology could become the major enabler for mobile payment, ticketing and information sharing, along with a major vehicle for delivering ads to consumers’ phones.

Of course, Apple’s adoption of NFC is widely anticipated this year when it releases the iPhone 5, if only because it has filed a passel of patent applications involving NFC and now has had another year to implement the technology in its devices, starting with the iPhone. The iPhone 5 release could come this summer or earlier. NFC backers were disappointed last June when the iPhone 4 came out without the technology.

Payment Not the Chief Focus
But if Apple does take the NFC plunge, I'm not convinced its focus–or Google’s for that matter–will be on mobile payment itself or on launching their own m-payment schemes at the point of sale. 

Update: A report Jan. 25 by Bloomberg that Apple plans to introduce a payment service involving iTunes on NFC-enabled iPhones and iPads is based largely on speculation from two apparently single-person consulting firms with no direct knowledge of Apple's plans. The story again trots out Apple's hiring of Benjamin Vigier last year as project manager for mobile commerce. Vigier, in fact, is a junior-level manager with inconsistent experience with NFC. And it also suggests Apple would roll out low-cost point-of-sale terminals, which they would give for free to small merchants.

The same Bloomberg writer earlier this month suggested Google also is planning an NFC-based payment service, which I've heard is actually the Cream wallet for Android phones. The wallet would be open to a variety of service providers, such as banks. There's also a theory going around about Google handing out free POS terminals to support its Google Checkout service at the physical point of sale. End update.

Instead, Apple and Google are interested in connecting consumers with merchants and product makers through location-based mobile advertising and promotions and merchant and product information on demand. Google has offered a small glimpse of what it has in mind with its trial in Portland, Ore., enabling users of its new Nexus S NFC smartphone to tap RFID tags embedded in decals merchants can affix to their storefronts windows. The taps trigger downloads of recommendations, reviews and other information on the merchants as an extension of Google’s network-based Hotpot service.

The advertising and merchant or product information from Android and Apple NFC phones could be based on the consumers’ browsing and search histories, their tapping patterns or their past buying behavior.

To be sure, both Google, as well as Apple, if it goes for NFC, would consider it vital that the consumer can both receive information about products and merchants on their phones then “consummate the transaction” on the same device, as a Google executive recently put it. He was not speaking about NFC in particular. It might even be a payment transaction over the mobile network at some merchants, especially small, remote merchants.

So Google and Apple would serve as enablers of NFC-based payment, which could be offered by banks or other payment service providers, not as the main payment providers themselves.

For Apple, an NFC-enabled iPhone might even be able to suggest to a consumer what payment application to use when he is ready to pay at a particular store, based on the best rewards program connected with that payment-card application on the phone or the account he normally uses at the merchant location.

Apple has suggested in at least one of its patent requests that it could control the database that hooks product manufacturers and banks up with consumers at critical points in the purchasing process. Apple would charge the consumer product companies and banks for the access.

Control of Embedded Secure Chip
But even if, as I expect, Apple doesn’t push its own NFC-based payment application, such as iTunes, at the physical point of sale, it would still insist on controlling embedded secure chips in the NFC phones it orders.

All the major NFC chip makers are offering these companion embedded smart card chips, which are either stacked together with the NFC controllers or a part of a single chip.

A major theme running through Apple’s NFC patents is enabling users to sync content among various Apple devices, with the iPhone serving as the hub of this device-sharing network. Credentials to authenticate the phones and its users could be stored on the secure chip.

But the embedded chips also could store payment, ticketing, physical access control and other secure applications. This could put handset makers in competition with mobile operators.

Such phone makers as RIM and some of the Android handset manufacturers, among others, have already ordered NFC chips with embedded secure elements. It remains to be seen what they do with the chips.

The phone makers get the master keys to the chips when they purchase them from the chip makers. But mobile operators that buy and then subsidize phones for subscribers could demand that the handset makers turn over the master keys to them.

Apple, however, would still have the clout to refuse.

Multiple Secure Elements Possible
In addition, most of the NFC chips will likely also support the single-wire protocol, or SWP, standard and applications on SIM cards, which the majority of the world's mobile operators issue to subscribers to access the network. Many telcos, especially in Europe, have constructed their business cases for NFC around hosting payment and other secure applications on their SIMs.

So, a number of NFC phones could support at least two secure elements–one on the SIM via the SWP connection and the other on embedded chips in the phones. There could potentially be a third secure element, or more, mainly on microSD cards that plug into the NFC phones and use the handset’s built-in contactless antenna.

But of the three secure elements, the prospective control of the embedded chip is the least clear-cut, and that’s where we could see a battle for control among mobile operators, handset/mobile platform suppliers and service providers, such as banks.

Apple could set the trend here, depending on what it does with the secure elements in any NFC phone model it introduces.

Of course, I doubt Apple boss Steve Jobs was discussing the issue with executives earlier this month before he took his planned medical leave.

But if Google’s mobile wallet and other NFC m-commerce initiatives make a splash–the wallet might be introduced in coming weeks–the topic of NFC might just come up when Jobs calls into the office from time to time.


Australian Transit Agency to Launch Mobility-as-a-Service Trial as It Pursues Long-Term MaaS Strategy

Plans by Transport for New South Wales, Australia’s largest transit agency, to launch a trial enabling users to plan, book and pay for multimodal rides is the next step toward the agency’s long-ter

Updated: U.S. Transit Agency Seeks to Reduce–Though Not Eliminate–Cash Acceptance with New Fare-Collection System

Updated: The Spokane Transit Authority in Washington state confirmed that its new fare-collection system will include contactless open-loop payments–with a beta test planned for next October, a spokesman told NFC Times' sister publication Mobility Payments.

UK Government Seeks to Bring London-Style Contactless Fare Payments System to Other Regions

The UK government’s plan to equip 700 rail stations over the next three years to accept contactless open-loop payments is a major initiative, as it seeks to replicate the success of London’s contactless pay-as-you go fare payments system elsewhere in the country–a goal that has proved elusive in the past.

More Cities in Finland Expected to Move to Open-Loop Fare Payments

A fourth city in Finland is beginning to roll out contactless open-loop payments, with “more in the pipeline,” according to one supplier on the project, making the Nordic country one of the latest hotspots for the technology.

Moscow Metro Expands Test of ‘Virtual Troika’ in Pays Wallets, as It Continues to Develop Digital-Payments Services

Moscow Metro is recruiting more users to test its “Virtual Troika” card in two NFC wallets, those supporting Google Pay and Samsung Pay, as one of the world’s largest subway operators continues to seek more ways for its customers to pay for rides.

Ohio Transit Agency Expects Significant Revenue Loss as it Builds Equity with Fare Capping

The Central Ohio Transit Authority, or COTA, officially launched its new digital-payments service Monday, including a fare-capping feature that the agency estimates will cost it $1.8 million per year in lost fare revenue, the agency confirmed to Mobility Payments.

Special Report: Interest Grows in ‘White-Label EMV’ for Closed-Loop Transit Cards

As more transit agencies introduce open-loop fare payments, interest is starting to grow in use of white-label EMV cards that agencies can issue in place of proprietary closed-loop cards for riders who don’t have bank cards or don’t want to use them to pay fares.

Swedish Transit Agency Launches Express Mode Feature for Apple Pay, though Most Ticketing Still with Barcode-Based App

Skånetrafiken, the transit agency serving one of Sweden’s largest counties, announced today it has expanded its contactless open-loop payments service to include the Express Mode feature for Apple Pay.

Major Bus Operators in Hong Kong Now Accepting Open-Loop Payments–Adding More Competition for Octopus

Two more bus operators in Hong Kong on Saturday launched acceptance of open-loop contactless fare payments, with both also accepting QR code-based mobile ticketing–as the near ubiquitous closed-loop Octopus card continues to see more competition.

Moscow Metro Launches Full Rollout of ‘Face Pay;’ Largest Biometric Payments Service of Its Kind

Touting it as the largest rollout of biometric payments in the world, Moscow Metro launched its high-profile “Face Pay” service Friday, as expected, and predicted that 10% to 15% would regularly us

Indonesian Capital Seeks to Expand to Multimodal Fare Collection and MaaS

Indonesia’s capital Jakarta, whose metropolitan area is home to more than 30 million people, is notorious for its stifling traffic congestion. In response, the government metro and light-rail networks and now it is funding an expansion of the fare-collection system to enable more multimodal payments and to build a mobility-as-a-service platform.

Exclusive: NFC Wallets Grow as Share of Contactless Fare Payments and Not Only Because of Covid

Transit agencies that have rolled out open-loop contactless payments are seeing growing use of NFC wallets to pay fares, as Covid-wary passengers see convenience in tapping their phones or wearables to pay.