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.