Apple embraces near field communication technology
Why Apple's iPhone 6 is shaking up the smartphone market (Part 4 of 9)
Near field communication technology has been around for a while
Earlier in this series, we discussed how the success of Apple’s (AAPL) iPhone 6 Plus could boost the phablet market. We also looked at why Apple needs to make new iPhones available in emerging markets sooner. With the recent release of bigger iPhones, Apple introduced another important new feature. This is the mobile payment feature named Apple Pay that relies on near field communication (or NFC) technology.
NFC isn’t new. Before Apple adopted it, NFC technology had been adopted by many Android and Microsoft (MSFT) Windows-based smartphones. Google (GOOG) (GOOGL) Wallet and Softcard, a joint venture between AT&T (T), Verizon (VZ), and T-Mobile (TMUS), are examples of NFC-enabled mobile payment systems that have been around for a long time now. Meanwhile, mass adoption of NFC has yet to occur. Let’s look at the reasons why.
First, the technology can only gain mass acceptance when merchants install NFC scanners at their end. High costs associated with these scanners have deterred merchants, especially the smaller ones, from using the technology. Second, the technology needs to be user-friendly and faster than the traditional credit card transaction. Apple claims that Apple Pay’s one-touch checkout feature will save time and bring simplicity to the whole process.
NFC technology fails to be adopted
According to a report from Gartner, the value of mobile payment transactions worldwide has increased from $163 billion in 2012 to $235 billion in 2013. Meanwhile, because of the disappointing adoption rate of NFC technology, NFC contributed only 2% to the total transaction value in 2013. This share is forecast to increase to only 5% by 2017. Clearly, Apple needs to do much more to ensure mass adoption of NFC technology. In the next part of this series, we’ll look at this issue more closely.
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