“There’s a brilliance to the timing of Apple’s adoption of near field communication (NFC) technology,” Michael Carney writes for PandoDaily. “There are just 220,000 NFC-enabled merchants in the US today, out of the roughly nine million total merchants in the country.”
“But here’s the twist. There’s another major change set to occur in the payments landscape that will require the majority of these nine million merchants to deploy new hardware in their stores in the next year,” Carney writes. “As of October 2015, any merchants that do not support EMV credit cards – smart cards with integrated circuits that enable point of sale authentication and help prevent fraud – will be liable for the fraudulent use of counterfeit, lost, and stolen cards.”
“Millions of merchants will be required to purchase and install new card-reader hardware in the next year in order to comply with this standard. And when these merchants shell out for new card-readers, something they might do at most once or twice per decade, there’s a good chance they’ll opt for all the ‘bells and whistles,'” Carney writes. “Following Apple’s announcement, NFC is right at the top of the list of must-support technologies. Hence we could see a dramatic spike in NFC support in this country.”
Read more in the full article here.
Related articles:
MasterCard SVP: Apple Pay trumps traditional credit and debit cards in security – September 11, 2014
Authorize.Net announces support for Apple Pay – September 11, 2014
Apple Pay’s myriad advantages over the $300 million Google Wallet flop – September 11, 2014
Apple Pay may boost sales of larger iPhones, hurt Android phone sales – September 11, 2014
Why Apple Pay will hurt PayPal – September 10, 2014
Apple Pay will demolish the barrier between online and offline shopping – September 10, 2014
Disney CFO: Apple Pay is a huge advantage – September 10, 2014
Pacific Crest: Visa, MasterCard, American Express boosted by Apple Pay – September 10, 2014
Apple to rake in fees from banks with Apple Pay mobile payments platform – September 10, 2014
Visa teams with Apple on Apple Pay mobile payments platform – September 10, 2014
MasterCard partners with Apple to integrate revolutionary Apple Pay – September 10, 2014
TSYS supports Apple Pay – September 10, 2014
Apple announces Apple Pay mobile payments – September 9, 2014
That’s a twist I didn’t know, and fills in a question I had about adoption rates. This makes a big difference.
Verifone has released two touch screen terminals that places like Target and Lowes have already deployed – the bigger of the two with the 7″ screen needs an NFC add-on (Lowes installed these in their stores, WITHOUT the NFC add-on). The smaller 5″ screen units – which I think Target deployed – have NFC built into them,it might just be a matter of turning the NFC on for retailers that have the new smaller terminals.
Does that mean Google pay systems would also be supported? I’d love to see them shut out. I know it’s mean but frankly there’s no love lost…
Theoretically, I think yes, but not out of the box. NFC is just hardware; the merchant would need to have an agreement with Google as well.
If I’m a shop owner and am willing to shell out $250 for a new terminal in order to support Apple Pay, I’d probably contact Google as well and see what are their terms. If it doesn’t cost me anything extra, I may as well make a deal with them. The logic behind the thinking is that even if it brings in one single customer, it may be worth it (again, if it doesn’t cost anything extra).
Of course, this would require me to be oblivious to the degree of private information Google would be vacuuming from my customers through this terminal…
That’s something for Google that is an anathema to them to agree to – transactions without anything in it in the way of data mining for them, as Apples does. That alone should give Apple a leg up besides so many other advantages. Privacy and security is in short supply these days and becoming even more valued.
I have no doubt Apple was fully aware of this timeline when they were planning the introduction of NFC and negotiations with banks.
Google had to try convince everyone to buy into the NFC terminals. They had no reason to do this. Apple doesn’t have to do this — they have to go out and buy them anyway, so when they realise the numbers of iPhone owners with Apple Pay enabled, they will easily justify the little more expensive PoS devices with NFC in order to attract more affluent and desirable iPhone clientele.
Or not, depending upon their customers.
I’m sure that if wanted to, they could make a NFC adapter, that would plug into the lighting port on the 5s, thereby enabling NFC on the model, that way you wouldn’t have to buy the watch to have this with the 5s. Or they could authorize a 3rd party to create this peripheral. Who know, maybe they will.
The problem isn’t just NFC, its the hardware security that was designed into the iPhone 6.
The 5s also has Secure Enclave on the A7 processor so I believe a NFC dongle could probably work.
The Keynote explained this. There is another chip for Apple Pay. The secure enclave in the CPU is for the fingerprint scanner.
Here in Oz we have had touch pay at almost every outlet in the country for well over a year. Non chip cards are not accepted at most places and you must use a PIN as signatures are no longer accepted at almost all outlets. I even had a place refuse cash the other day. Bazaar!! It will be interesting to see if the iP6 apple pay system works here because if it does out of the box then almost every retail outlet plus government systems will be available immediately. Even the pay wave logo is the same as in the demos shown. Perfect test case and marketing opportunity for apple… Plus we are a bit iPhone mad here. Rapid adopters of new tech.
NFC is a set of hardware standards for secure wireless communication between devices in extremely close proximity (few centimetres apart).
There is a difference between the NFC systems (whether one-way, such as the ones where you wave your NFC-enabled passive credit card over a terminal, or two-way, where the device can also exchange data), and the physical card readers that require credit cards with smart chips and PIN (EMV standard). The NFC is completely wireless; the EMV needs a credit card with the smart chip, which is inserted into a reader, and the customer enters PIN on a numeric keypad on the reader. Currently, America is the only country in the world where the old magnetic-strip and signature-with-a-pen-on-paper system is still used (the rest of the world has moved to EMV chip and PIN cards, and in some countries, magnetic-strip system is no longer even accepted for payment).
Back on point, iPhone 6 /6+ and Apple Pay can’t work out of the box until all those merchants that have NFC readers go out and sign an agreement with Apple for payment processing. In this scenario, Apple will essentially provide a merchant account for these retailers, and the fees they will charge for the service are likely to be very competitive (compared to standard merchant account service providers). With that in mind, it is safe to assume that these merchants will be strongly motivated to do this, if they want to attract affluent iPhone owners.
Thx mate. That was informative.
The dr
Does the store need an agreement with Apple or the credit card company? I thought it was all those companies agreeing to accept Apple Pay, for which they are giving Apple 1.5%. And the stores agree to install the readers, for which, as far as I can tell, they give Apple nothing.
I know. .15%. D’oh!!
This is why Apple has made agreements with Visa, MasterCard and American Express, as well as with some major retailers (many of whom do a major part of their own credit card clearing). The Mom & Pop merchant – or even the 8-store tire retailer chain – won’t need an agreement with Apple to support Apple Pay; their agreements with Visa and MasterCard – possibly through their bank or credit card clearing company – will take care of it. All they will really need is the hardware.
Bizarre indeed!
I don’t think it’s only touch-and-go payment systems beginning to make greater inroads into smaller shops, the same technology in transit ticketing systems is spreading into smaller cities, and I think will soon reach a critical mass, especially when it suddenly dawns on large numbers of people that by just installing and registering particular apps on their phones will enable them to carry out daily transactions like buying their morning coffee and paper or magazine, then get on their train or bus by just holding their phone over a yellow disc by the till or ticket gate.
No more fumbling around for change, or having to query if the shop will take a debit card for a transaction worth only a few dollars or pounds or whatever.
I think this will far bigger than many people realise, especially those saying ‘NFC? What’s it for, we don’t need it!’
Or their watch…
Wall Street will continue to downplay Apple Pay for reasons I’m not really certain about. Apple has a very unified ecosystem and a huge number of iTunes accounts/credit cards. All the major card companies are getting on board and most retailers, so I’m not sure what Wall Street is disappointed about. Not enough revenue from millions of transactions? I want an iPhone 6 specifically for Apple Pay. I want it to replace my cash, credit card and eventually my transit MetroCard. It seems like a no-brainer to me but Wall Street always seems to have its doubts, as usual, when it comes to anything Apple is trying to change.
“As of October 2015, any merchants that do not support … will be liable for the fraudulent use of counterfeit, lost, and stolen cards.”
This has always been the case. Merchants have always taken the loss when a bad card is used. If people don’t pay their cc bill then the card company takes the loss.
BTW, who do you think pays for your points when you use your card? The merchant does.
Actually, this is not entirely true. If a fraudulent card is used, but the merchant is nonetheless given an authorization code by their credit card clearing company, the merchant’s liability is limited. That limitation will end for non-EMV cards as of 10/15.
Another clever thing apple did, they allow a rumor that iphone will have NFC in 2010, but they didn’t.
Then, it let all other companies to try to copy (as usual) so they wasted their money to perform Apple’s beta testing.
Once people and companies publish the pros and cons of the NFC, apple polish all that and “BOOM!”, the best NFC payment system with out having to release a BETA.
Thank you so much copycats for helping apple make the best NFC payment system in the world.
And also, thank you again copycats for helping apple make the best Watch and some day the best TV!.
Apple also avoided the chicken-and-egg situation, with merchants needing to invest into, and banks to agree to something before there were customers who could use it. They let Google try to mercilessly push and coax and cajole and beg merchants to embrace NFC, which got a few of them started. This group is now the foundation which gave Apple some ammunition to negotiate with the few big ones (Macy’s Bloomies, Walgreens, etc) so that there is now a decent group of them that can allow early iPhone 6 and Apple Pay adopters to use the system immediately, while other merchants get on board.
I would like to see mass transit systems embrace this (and mobile technology in general) for their paperless and ticket-less fare systems. It can be done.
At the moment, MTA in New York has plastic MetroCards which need to be swiped for entry into the subway system or on busses. Some express buss lines have MetroCard machines on the sidewalk, where you swipe before you board the bus and receive a paper receipt, which you show to inspectors if they board your bus along the way. The colossal waste of paper for the receipts is absurd, when the whole thing could easily be handled with mobile devices. All it requires is some effort.
San Diego Transit has a “COMPASS card” which works with something closely akin to NFC (if not NFC); you “tap” your card to board a bus or trolley, and the card is required for anything more than a single-ride ticket. I very much hope that the iPhone can take the place of the COMPASS card. (Not that I ride the trolley a lot, but it’s great for Padre games.)
If the merchant is charged a lower transaction fee by the credit card company with Apple Pay then the new point of sale equipment will pay for itself.
Think of the savings the Apple Stores will make alone?
The depressing problem I have with this is that many of the giant retailers in my area have JUST recently replaced their POS card-readers with newer units to support the upcoming chip-and-signature requirement, and they don’t look to me like they support NFC 🙁 When I do see a unit with obvious NFC support, I always ask the clerk if its actually working, and they ALWAYS say “no”.
A couple things that I believe must be kept in mind:
1) NFC has been abused as a ‘security solution’ when in fact the typical bare bones bone-headed implementation of NFC has meant these cards were actually LESS secure than a magnetic stripe in that any granny with a triggering device could walk near you and steal your data off the card. Darn, you’ve just been PWNed. That crap NFC technology remains the sick and stupid norm today.
Apple isn’t using the bone-headed NFC implementation. Not even a little. All nasty crook grannies can steal from your iPhone NFC chip is useless nonsense good for nothing-at-all. Bravo Apple for getting it right!
2) The ongoing POS robbery of customer accounts would have occurred just the same as it has with magnetic stripe cards if everyone had been using the bone-headed version of NFC technology typically found in stupid-cards today. Why? Because the problem is NOT in the cards. The problem is in the POS scanning devices!!! Target and similar diversionary bastards would like to pretend otherwise, but cards were NEVER the problem in this case. The specific problem occurs once that card is read: ALL of the cards data is stored in-the-clear (no encryption) in RAM on the POS POS devices. These devices were poorly designed for their purpose. The fact that this barbaric things run Windows XP Embedded adds another giant clue as to their worthlessness for their purpose.
And oh look, moronic Home Depot had the entire situation laid out before them in the very public news and they did NOTHING to stop it. There are actually updates to crappy Windows XP Embedded that detect and kill the malware behind these RAM data stealing account robberies. But moronic Home Depot didn’t bother to install them. The number of accounts stolen is predicted to be beyond the 110 million stolen from awful and incompetent Target. That makes Home Depot extra EXTRA incompetent.
Summary: Apple waited to do NFC until they had a SAFE, SECURE method of using NFC. No one else has bothered, yet. THAT is where Apple has been revolutionary. NFC need not be a the dirty word its nefarious history has indicated.
[This subject always gets me charged up, I so despise bad technology and bad science.]
Thanks to Target, Home Depot, and a local retailer equally porous, I am about to get my fourth bank debit card in less than a year so I can memorize my fourth PIN.
Great post, Derrick.
Would’ve been a better compliment if I spelled your name right, Derek. 😁
Excellent writing, Derek!
I feel compelled to clarify something that many may have missed from your post: “…data is stored in-the-clear in RAM on the POS POS devices…” Not a typo, this actually means “piece-of-sh!t point-of-sale” devices…
Just to make sure everyone is clear on the double acronym…
I used to add ‘not a typo’ in parentheses.
I still remember when we all said the iPhone didn’t have NFC and how bad it was. I guess Apple implemented it right