NFC Could Turn Apple Into ‘PayPal on Steroids’

| Rumor

News reports earlier this week that Apple could use Near-Field Communications (NFC) in its next generation of iOS devices have led some analysts to speculate that the company could revolutionize mobile payments. Gartner analyst Avivah Litan told Computerworld: “I see Apple as being a PayPal on steroids.”

While the ability to complete a transaction wirelessly isn’t a new idea, Ms. Litan noted that Apple’s advantage is its iTunes users base. “[Apple] can largely shut out credit card companies if they choose to,” she said. “They have 160 million users with digital wallets in iTunes accounts. They don’t have to do anything other than to NFC-enable their phones.”

Merchants would likely warm to the idea, she noted, if Apple offered lower payment fees than credit card companies currently charge retailers. In addition, Apple could come up with unique ways to leverage the intelligence already in its software: “You can imagine going through a turnstile at a concert, paying with your iPhone and instantly getting an offer to download all the music you hear at the concert,” Ms. Litan theorized.

Apple isn’t alone in pursuing this concept, of course: AT&T, Verizon, and T-Mobile announced last fall that they are working with Discover and Barclays to create something similar, and Google introduced NFC in its Nexus S Android smartphone. PayPal has also explored partnerships that would allow its user base of more than 200 million accounts to make wireless payments in stores too.

In addition, merchants would have to upgrade their payment systems to be able to accept NFC-based transactions, although Ms. Litan noted that stickers are already available that can be stuck to existing terminals. A Bloomberg report earlier this week speculated that Apple is working on NFC payment terminals that it might give away to retailers, or sell to them at heavily-subsidized prices, in order to speed up the adoption of the technology.

Sign Up for the Newsletter

Join the TMO Express Daily Newsletter to get the latest Mac headlines in your e-mail every weekday.

11 Comments Leave Your Own

Lee Dronick

Using my iTunes account to make small purchases via NFC appeals to me. I would still carry some cash around for emergencies and for use at places that would not accept electronic purchase such as tamale carts or Girl Scout Cookies.

BurmaYank

How clever a hacker would an iPhone thief need to be, I wonder, to make stealing an iPhone for use as a stolen credit card more profitable than for simply fencing it as a hot smartphone?

Lee Dronick

How clever a hacker would an iPhone thief need to be, I wonder, to make stealing an iPhone for use as a stolen credit card more profitable than for simply fencing it as a hot smartphone?

If the NFC account was linked to a limited amount credit account then probably not too much of a problem. Use prepaid iTunes cards to put funds in the NFC account or transfer funds in from bank account.

mhikl

Your last point defogged my glasses, Sir Harry. Now I see the potential. I thought Ccards would have to be somehow involved which would defeat the savings. Exciting idea, really. Competition is what is needed agin the licentious extortionist credit card racketeers. They’re fleecing business and therefore, everyone. And I mean this in the kindest way.

Lee Dronick

We wouldn’t be using this for big purchases such major appliances, iMacs, autos. We would be using it for relatively modest things such as buying gasoline, lattes, theater tickets, groceries.

The technology is already in use. I think that it is Mobile-Exxon that had a device for buying fuel at their service station. My wife’s transit pass is NFC and all she has to when boarding the bus is put it near the reader and take her seat; On the trolly, which is on the honor system, if challenged by security is to show him the pass which he checks with a portable reader.

paikinho

And why wouldn’t people use it for such things?

Lee Dronick

And why wouldn?t people use it for such things?

Security concerns, warranted or not. Not understanding the technology.

paikinho

But folks were concerned about online banking and lots of other things. Once the technology is mature enough and people see how it works it will become a replacement for having a visa card or mastercard.

And there will be new ways of using the tech that people right now are not seeing.

The current generation of tweeters and SMSers will only know an electronic world. They probably won’t want to use plastic cards for anything. It will be something old fogeys do.

Security will be assured using biometrics I suppose. You wont be able to make a purchase without the appropriate finger print or retinal scan.

I think security will evolve as it always does as new needs arise.

BurmaYank

”... folks were concerned about online banking and lots of other things. Once the technology is mature enough and people see how it works it will become a replacement for having a visa card or mastercard.”

WOW! CHECK THIS OUT!! I had no idea that this technology ALREADY IS mature enough and ALREADY HAS become a replacement for a visa card or mastercard - in Haiti!!!!!!!! (no less). 

Hear how it already works there by listening to this NPR podcast, or read, below, this reprinted transcript of that NPR podcast, “In Haiti, Cell Phones Serve As Debit Cards”:

In Haiti, Cell Phones Serve As Debit Cards
by JASON BEAUBIEN (Weekend Edition Sunday/NPR/January 30, 2011)

Larousse Dorcent runs a small grocery store out of a shipping container in the Haitian port city of Saint Marc. In December, Dorcent started accepting payments at his shop by cell phone.

The past year in Haiti has been marked by the slow pace of the earthquake recovery. But the poorest nation in the hemisphere is moving quickly on something else ? setting up “mobile money” networks to allow cell phones to serve as debit cards.

The systems have the potential to allow Haitians to receive remittances from abroad, send cash to relatives across town or across the country, buy groceries and even pay for a bus ride all with a few taps on their cell phones.

Paying By Cell Phone

Larousse Dorcent runs a small grocery store from a shipping container in a dusty slum above the Haitian port city of Saint Marc. Pigs and chickens wander freely through the neighborhood. It looks like a place that technology forgot ? except that for the past two months, customers at Dorcent’s shop have been able to pay by cell phone.

Dorcent punches a code into his own phone. Instantly he gets a message showing that he has 41,000 gourdes, or just over $1,000, in his account.

Dorcent says he likes that customers can pay from their phones straight to his.

“The first good reason I can give is when you’re handling a lot of liquid cash, it’s also being handled by a whole lot of other people throughout the country,” he says. “And these days, with cholera, it’s safer to not be in contact with currency that’s making its way throughout the country.”

What’s happening here in Saint Marc is a test program for the T-Cash service that is being launched by the phone company Voila.

Voila is working with Mercy Corps to distribute aid to earthquake victims. Saint Marc is several hours’ drive north of Port-au-Prince, and it wasn’t heavily damaged in the quake. But according to the mayor, 30,000 earthquake survivors moved into this small city in the weeks after the disaster.

“What we’re doing is we give nine months of food rations,” says Andrew Lucas, manager of the assistance program for Mercy Corps in Saint Marc. “Each month, each family will receive around $40 in credit to buy four products. They can buy rice, oil, corn flour or beans.”

Virtual Vouchers

Food aid like this is not distributed at all in the severely damaged capital. The goal here is to encourage people to migrate out of Port-au-Prince and, at the same time, to help the families that have taken them in.

Lucas says Mercy Corps used to hand out printed food vouchers. But now they’re giving each family a cheap cell phone loaded with $40 worth of T-cash.

“For us, actually, the vouchers are difficult. It takes a lot of time to distribute them. We have to print them somewhere, distribute them each month, collect them,” Lucas says.

But with T-cash, they can send out food aid to 300 families with the click of a keystroke. The system can also be used to pay employees, which, in Haiti, can involve huge stacks of currency or checks that employees then need to stand in long lines to cash.

Greta Greathouse is with the U.S. Agency for International Development (USAID), which is putting up millions of dollars to help get these systems going.

“We wanted it kick-started now,” she says. “We didn’t want to wait for three years.”

Potential Of Mobile Money

Only 10 percent of Haitians have bank accounts. Mobile money has the potential to offer banking-type services ? savings accounts, wire transfers, itemized account records ? to millions of Haitians who don’t have them.

And Greathouse says…” (continued in the next post, below).

BurmaYank

“... the technology is mature enough and people (can already) see ... it ... become a replacement for having a visa card or mastercard.”

- in Haiti!!!!!!!! (no less). 

(continued from previous post, above):
“Potential Of Mobile Money

Only 10 percent of Haitians have bank accounts. Mobile money has the potential to offer banking-type services ? savings accounts, wire transfers, itemized account records ? to millions of Haitians who don’t have them.

And Greathouse says mobile money offers advantages over traditional banks.

“It costs less,” she says. “The costs are less than going to the bank, and that’s before you add in the cost of transport to go to the bank and the time it takes you. And it’s safe.”

Pierre Liautaud, vice president for product development with Voila parent company Trilogy International Partners, predicts mobile money will transform and streamline Haiti’s cash economy.

“I envision a time when every Haitian will figure out that he’d prefer getting paid this way than any other method,” Liautaud says.

Haitians are already accustomed to buying cell-phone minutes electronically from vendors on the street. A vendor uses his phone to put extra time on your phone. You instantly get a message on your handset showing your new balance. Then you can re-send that cell phone credit again via text message to someone else.

Liautaud says this was an important precursor to mobile money.

“It’s an introduction not only to the technology but to the principle that I can send you something electronically that has value,” he says.

A Piece Of The Pie

The cell phone companies stand to get a small slice ? less than 1 percent of every financial transaction. Just in the money transfer business alone, there are huge opportunities. Haitians living abroad send roughly $2 billion a year to the island. Companies such as Western Union charge up to a 10 percent commission for that service. Viola’s T-Cash system allows transfers of up to $250 for roughly 75 cents.

One major problem facing the migration of cash onto phones in Haiti is that Voila and its main rival Digicel are both rolling out separate mobile money programs, and so far the systems can’t interact.

Voila’s system is now up and running. Liautaud says already there are 300 shops where customers can put cash on or take cash off their phone accounts. By mid-February, Voila plans to have 1,500 merchants accepting payments by cell phone all across Haiti.”

——————————————————-
Ref:
- http://www.npr.org/player/v2/mediaPlayer.html?action=2&t=1&islist=false&id=133305663&m=133348431 and
- http://www.npr.org/2011/01/30/133305663/in-haiti-cell-phones-serve-as-debit-cards

Lee Dronick

Thanks for the story about Haiti

Log-in to comment