Apple just had their annual September big event, this time announcing the iPhone 7, iPhone 7 Plus and Apple Watch Series 2. So how are they? Depends on where you’re coming from. If you were already an Apple fan, these products are great and represent Apple’s continual iterative push for innovative, useful and beautiful products. If you were already not an Apple fan, then you saw this as the 3rd year of an overhyped, lackluster product announcement with products lagging behind other devices from Google and Samsung. Then there is the issue of removing the headphone jack…
But does the new iPhone have the NFCs!? (inside joke) The short story is yes, it supports NFC. Yes Apple is expanding what NFC can do but no, it does not yet support reading and writing NFC tags. If you haven’t read our original post on this topic, I suggest you read it first. Here we are six months later and all of our claims still hold true. Now lets take a look ahead. Based on evidence we’re seeing, we expect the following progression to occur.
The big development for NFC is that Apple announced support for FeliCa in Apple Pay. You’ve never heard of FeliCa? You have likely never been to Japan. FeliCa is the dominant mobile payment system in Japan where it is used in most people’s daily routine; transportation, stores, restaurants, web… Think of it as an expanded version of London’s Oyster card, but where you can pay for more things than just public transport. The USA lacks a true corollary; but we’re really just talking about a more efficient way to pay for goods and services. The technical implementation of FeliCa is totally different than “traditional” Apple Pay and EMV; FeliCa stores the value on the card itself vs in the cloud. “I don’t live in Japan, so why is this a big thing?” Because it’s a sign that Apple is expanding what NFC can do in the iPhone. Call me optimistic, but I am looking at it like this; there are only three sets of numbers; 0, 1 and many. Two years ago Apple did not support NFC at all (0), previously Apple supported NFC via Apple Pay (1) and now Apple is adding support for FeliCa (many). It’s not as a big of a leap for Apple to start adding additional uses for NFC within the iPhone; things like NFC tag reading and writing. As we said back in March, the more that consumers learn to trust that they can use their mobile device as a magic wand to interact with the world, the more you will see new deployments of this technology. Companies like Apple will add support to meet that demand.
So how is Apple Pay doing? Great, but a bit slower than they had hoped. Since our original post Apple has expanded Apple Pay throughout Europe, Hong Kong and beyond with a total of 9 major markets. Apple Pay is available at 11+ million locations worldwide and growth is doubling. This fall they are expanding to New Zealand, Russia and more. Apple Pay’s success and continued expansion is pretty amazing considering the number of geographic, cultural and political hurdles to overcome. Remember it’s hard to get people to change their daily behaviors and to trust new ways, especially when it comes to money. Importantly, there still has not been a single security issue with Apple Pay or the NFC hardware in the iPhone. This is all good.
When will Apple support NFC tags though? When they feel the time is right; and by right I mean when they feel that Apple pay has succeeded, consumer’s trust has been earned in contactless interactions and there is enough external pressure. You can’t rush Apple. A lesson learned this summer when a group of Australian banks tried to force Apple to open up access to the NFC controller so they could build their own competitive mobile payment system. Apple quickly shot this down with the argument that it would “diminish security” and that Apple is protecting consumers. This of course is not entirely true, but it takes too many words to understand why not so it’s a beautiful argument. In reality, Apple is using this to block competitors to Apple Pay because there are billions of dollars in profit to be made.
Hope is not lost for the iPhone reading and writing NFC tags though. Without getting too technical, there are multiple components that comprise the NFC system in the iPhone. Part of this is the NFC controller (radio) and part of this is the secure element (bank vault). For a mobile payment systems to work it needs access to both the NFC controller and the secure element as it needs to securely store data for the financial transaction processing. Functionality such as NFC tag reading and writing does not need access to the secure element, but only access to the NFC controller. This difference is key. Apple will never open up access to the secure element as it would allow for competitors to build other mobile payment systems; Apple will always use the argument of “diminish security” to prevent this. However they can easily open up access to the NFC controller to allow for non-payment use cases. This is what we expect to see happen.
Does this even matter? Depends on how close to Cupertino you live. In the USA where the cult of Apple is stronger, the lack of NFC tag support in the iPhone is a bigger deal. Outside of the USA this isn’t as true. GoToTags has recently expanded to Europe and sees the NFC market as strong and growing. In areas like South America the iPhone is almost irrelevant, with Android dominating the market. GoToTags works everyday with companies worldwide to develop their product strategy for NFC, for both internal and consumer uses of NFC. NFC tags can be found everywhere and are going into everything; without most people even realizing it. NFC is being used for product information in retail, for anti-counterfeiting of products, physical security, assets tracking, gaming and out-of-home marketing; oh.. and mobile payment too. When NFC tags are combined with a management and analytics system such as the GoToTags Cloud and other tag technologies, it allows for even more functionality and value to be derived.
Someday Apple will have a big event and tell the world about the other uses for NFC. When that happens the Apple fans will see it as continual innovation at the “right time”, and the non Apple fans will see it as the iPhone finally catching up. Either way, it’s already happening now. The sooner you start planning for it, the more ready you will be for it.