When Apple (NASDAQ:AAPL) announced the iPhone 5, it turned out that rumor sites had the details of the new smartphone pretty much nailed — from the bigger display to the micro SIM to the new Lightning connector and even down to the anodized aluminum case.
Leaked iPhone 5 component photos also had one mysterious square that many people speculated was concealing a Near Field Communication (NFC) chip. That rumor, though, was debunked with Apple’s reveal. NFC was absent. The obvious question, of course is: Why?
The rumors of NFC capability – supporting an iWallet – didn’t seem far-fetched. Digital wallets and payment are growing in popularity. Retailers are jumping on board, consumers seem eager to have i and payment processors are scrambling to avoid being left behind .
Plus, NFC chips are increasingly becoming standard features in smartphones. Samsung’s Galaxy III S has NFC, as do Google’s (NASDAQ:GOOG) trio of new Motorola Droid RAZR phones and Nokia’s (NYSE:NOK) recently unveiled Lumia 920 Windows Phone 8. Heck, even Research in Motion (NASDAQ:RIMM) – the tech world’s favorite target for flogging previous generation devices — has not one, but a handful of NFC-equipped BlackBerries.
Everyone seems to be scrambling to figure out digital wallets … except Apple. Does that mean the company is sitting this one out?
Hardly. Instead, Apple is simply doing what it does best: Studying the efforts of pioneers, gauging consumer reaction, assembling pieces and putting a foundation in place. It is probably also quietly negotiating some partnerships on the side and waiting until the dust has settled sufficiently to act decisively.
And that actually seems like a logical approach considering that digital payments are a mess these days; there are too many players and too many competing standards.
Square signed a deal with Starbucks (NASDAQ:SBUX), eBay‘s (NASDAQ:EBAY) PayPal won over Home Depot (NYSE:HD) and Discover Financial Services (NYSE:DFS), cell-providers Verizon (NYSE:VZ), AT&T (NYSE:T) and T-Mobile combined for the ISIS mobile wallet, Google added its own version, then a group of the biggest department stores — including Walmart (NYSE:WMT) — launched yet another mobile payment scheme.
So, sure, some smartphones with NFC will let users pay for products wirelessly at some stores … but not with any consistency. Consumers face a confusing array of choices, on top of concerns about security.
In fact, the better question is why Apple would spend the money and effort to include NFC capability in the iPhone at this point in time. Doing so would hardly give them a leg up on the competition, but would instead be just another competing standard. And consumers would be unlikely to have a great experience given the current environment.
Instead, Apple has taken good baby steps. It’s tried out barcode scanning and mobile payment in its own stores using EasyPay. The new iOS 6 used by the iPone 5 also introduces Passbook, a digital wallet of sorts that keeps all your coupons, loyalty cards, movie tickets, rewards and passes in one place. And in August, it bought AuthenTec – a company specializing in fingerprint sensor technology.
People sometimes forget that Apple didn’t invent the tablet or the smartphone or the MP3 player. It watched and waited, and then released products that seemingly came out of nowhere — the iPod, iPhone and iPad — that quickly became dominant players in their category.
Really, it should have been no surprise that the iPhone 5 lacks NFC. It’s just too early in the game.
But don’t expect Apple to give up on mobile payments. The iWallet will make an appearance — possibly with the iPhone 6, perhaps later if Apple isn’t ready to pull the trigger — and there’s a good chance it will be a hit.
In the meantime, you can bet that Google and all the others will be furiously trying to build up a lead, hoping that a big enough head start will prevent history from repeating itself.
As of this writing, Brad Moon did not have a position in any securities mentioned here.