Why NFC could be yet another game-changer for Apple

“Near Field Communications (NFC) is a technology that — after merchants install necessary point-of-sale hardware — will allow users to pay using their mobile phone rather than a traditional credit or debit card,” Eric Jackson reports for TheStreet.

“Picture waving your iPhone at the grocery store to pay, rather than your Visa, Mastercard, American Express, Bank of America or JPMorgan Chase debit or credit cards,” Jackson reports. “Your iPhone would already be linked to your iTunes account anyway, so the process would be comfortable for many right from the start.”

“Make no mistake: Apple has its long-term eyes on totally disrupting the cozy and lucrative perch on which the major credit card companies sit. In the U.S., this represents a $6.2 trillion market today,” Jackson reports. “Apple wants to take a major share of mobile payments in the future.”

Read more in the full article here.

[Thanks to MacDailyNews Reader “Fred Mertz” for the heads up.]

26 Comments

  1. i am not so sure that credit card companes will be as severely hurt as is predicted by some.
    in fact for those people who replenish their iTunes account using their credit card, those companies actually SAVE MONEY because many small credit card transactions are replaced by occasional larger xfers.

    1. Don’t credit card companies get paid per transaction? Or is there just a % rate on each transaction, so numbers of transactions don’t matter?

      Also, I don’t know the numbers but I’d assume the vast majority of revenue for CC companies comes from interest payments, no?

      Last question: is the hardware on the vendors side already NFC enabled? Is NFC basically the same as those credit cards you can wave in front of the machine? PayPass or whatever it’s called?

      1. I believe that the fee is based upon a percentage of the transaction, possibly with a minimum floor to dissuade many small transactions. That would explain why many places refuse to accept a credit card for purchases under $5 to $10.

        The transaction fee is in addition to any interest payments or other fees that are charged to the consumer. So there is a lot of money to be made in revolving credit.

        1. I know that vendors that refuse credit transactions ( minimum for purchase etc) are in violation of their contracts with CC companies. They’re not supposed to refuse small transactions.

    2. What if Apple becomes the credit source for many of its iTunes accounts?? Buy a small bank, offer attractive terms to consumers, and many will switch. It doesn’t even have to take the form of a physical credit card (especially with NFC), although I wouldn’t mind having a credit card with a big Apple logo on it.

      1. Doubt it. Apple is all about the user-experience. I doubt they want to go down the road of collecting interest payments and sending agencies after you for your delinquency.

        Nah, they’ll leave the dirty work to the banks, Visa etc.

  2. I can picture the 30% cut Apple will later demand. This will not go well. Due to latest Apple aspirations in new T&C all such dreams for NFC are DOA.

    The new T&C is the stupidest thing SJ could have done now. He did it too early. The bait is half hooked and the switch will scare the heck out of any provider.

    1. Apple won’t require 30% for purchases outside the App Store. If you buy a subscription in the app store, because of the app store, then they take 30%. They certainly won’t be requiring 30% when you use their NFC tech to buy groceries!

    2. 0.5% or less could potentially create a megaflow of cash for Apple while still undercutting the vendor fees associated with debit or credit card transactions. If Apple keeps the cost very low, then vendors will likely jump on it.

    3. I agree. Apple demanding 30% of the world’s revenue does seem a bit drastic. Obviously, we’re being a bit sarcastic (bitter) and we know that it won’t be 30%. However, say Apple releases a new app which points people to the nearest/cheapest gas/grocery/whatever store and then requires the store to cough up 5% instead of 1%. After all, Apple is bringing the store a new customer, right?

      The only way this works out is if Apple (and Android/Windows/Blackberry) phones are all dumb pipes for the financial transaction and a common clearing house is used. If there is an NFC terminal, no one wants to worry if that store has an agreement with Apple or Google or whoever.

  3. Financial whores like Visa take a 2.5% cut off every transaction. Apple could tie it directly into your bank account and take zero. Suddenly, Visa will decide that it doesn’t need $1.5 billion in profit each year – a couple hundred million will do.

    1. Every entity that touches a item, from raw source materials to final product for the end user, wets their beak along the way. Credit card companies are simply more visible to us than all the other the other guys. I don’t think they are whores for charging a transaction fee (they are providing a service and convenience that one can choose not to use). Their interest rates on unpaid balances, on the other hand, are bordering on criminal.

  4. Apple will just make it simpler to purchase things using an iDevice. Why turn this NFC usage into some multi-billion dollar venture for Apple? NFC chips have been used in devices for years and those companies are not making all that much money. I know it sounds exciting as some huge revenue stream for Apple, but I think pundits are making too much out of nothing.

    Apple seems very happy with merely churning out hardware and software for consumers. I doubt if they want to complicate their business with some sideline. If that was the case, they probably could have had a bigger business for streaming movies than Netflix with all the credit card accounts that they have. All this NFC hoopla probably won’t amount to all that much unless Apple goes and buys Visa or some other credit card company. Apple doesn’t seem to take advantage of even their hardware by selling products to the enterprise even as badly as they want Apple to. Apple is still a relatively small company in terms of number of employees and it may take some time to grow all the divisions needed.

  5. The amount that the card companies take from merchants depends on the terms of the contract with them. The terms of the contracts vary wildly. For small businesses the “discount rate” (the percentage they take of each sale) is often more than 2.5%. On top of that there are a boatload of fees that can bring the true percentage of each sale to 4% or more. (been there done that) Small business hate credit card companies with a passion that is hard to explain, and they will leap at the chance to pay less for transactions to Apple.

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