the future is coming

Apple’s Newest iPhones and iPads Will Function Like Credit Cards

If you’ve never heard of near-field communication, it’s the wonky-sounding technology that does some incredibly cool things. N.F.C., which has been popular in countries like Japan for years, lets you use your smartphone or other mobile device to beam and receive information from up to four inches away. Just by holding your phone up to an ad in the subway, you can download a coupon, for instance, along with directions to the nearest store where you can swipe it. It can also be used to make payments, or even send photos, instantly and securely, over a short distance. According to Bloomberg, the next-gen iPhones and iPads set to launch this year will each have N.F.C. chips baked in. But Google’s already done that with the Nexus S Android device. The big reveal here is that Apple will link the chips to iTunes, a payment system with 100 million existing accounts. The main reason N.F.C. has been slow to catch on is because, “manufacturers likely know that there’s simply no good payment processing system behind any of the current ideas,” says TechCrunch. Credit card companies were the obvious choice to build support for the hardware, but they aren’t exactly motivated to rock their lucrative boat.

With this move, Apple is not only able to muscle into the $6.2 trillion Americans spend annually on goods and services, it’s also able to get around the credit card processing fees that it has to hand over with every iTunes purchase. Tapping consumers bank accounts directly, like PayPal, means better margins. The launch is well-timed: The recently passed Durbin Amendment, which goes into effect this summer, will let retailers, who want to limit their debit-card fees, encourage consumers to use one payment method over another. Along with the chips, Bloomberg says Apple will revamp iTunes so that it will offer loyalty credits and points.

Of course, the revolution doesn’t just happen overnight. There’s still the matter of getting consumers to adopt this approach, something Google’s struggled with. Apple’s controlling, carefully curated way of launching new products under Steve Jobs is likely to make a more comforting transition, especially since you already trust them with your credit card info. (We still don’t know anyone who’s signed up for Google Checkouts.) The other hurdle is getting retailers the equipment to read those N.F.C. chips, which Apple’s already trying to address:

Apple has created a prototype of a payment terminal that small businesses, such as hairdressers and mom-and-pop stores, could use to scan NFC-enabled iPhones and iPads, Doherty said. The company is considering heavily subsidizing the terminal, or even giving it away to retailers, to encourage fast, nationwide adoption of NFC technology and rev up sales of NFC-enabled iPhones and iPads, he said.

Apple has the size — if not the relationships just yet — to get those devices around quicker than say, Square, the mobile payments service that turns your iPhones into a credit card swiper (once they order Square’s square-shaped dongle to plug into the headphone hole). This means that Apple’s not only putting the pressure on Mastercard and Visa, but smaller, growing players like Square, run by Twitter’s Jack Dorsey, and Venmo, a New York-based start-up that lets you pay back friends or split bills with a tap of your phone.

If the gamble works, Techcrunch says, “It could transform Apple from the biggest technology company in the world, to the biggest company in the world, period. By far.” Well, now we now why Jobs felt it was a good time to leave.

Apple Plans Service That Lets Users Pay With IPhones
Apple Aims To Take NFC Mainstream; Perhaps The Greatest Trick They’ve Ever Pulled? [TechCrunch]
Apple Wants To Be Your Wallet With NFC [NYO]

Apple’s Newest iPhones and iPads Will Function Like Credit Cards