The hidden brilliance behind the timing of Apple’s adoption of NFC

“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.

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36 Comments

    1. 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.

    1. 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…

      1. 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.

  1. 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.

  2. 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.

  3. 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.

    1. 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.

      1. 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.

        1. 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.

  4. 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!’

  5. 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.

  6. “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.

    1. 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.

  7. 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!.

  8. 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.

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