Less Static for NFC

The Gimlet Eye

This magazine has been covering near-field communication (NFC) technology for payments at least since early 2006, when the first big field trial took place at a stadium in Atlanta. So we’re conversant with the advantages and drawbacks, the drama and the doldrums, associated with this exciting mobile-payments technology that never quite seems to live up to its potential.

Now, though, the picture may be brightening a bit. Next month, Apple Inc. is expected to start shipping its Apple Watch, a so-called wearable device that will do much more than tell time. Among its other functions, Apple Watch will work with the iPhone to let users conduct Apple Pay transactions in stores.

Apple Pay has had an ocean of publicity since its rollout last fall. Without question, it has done much not only to sell iPhone 6 smart phones but also for NFC, which it relies on to link wirelessly to point-of-sale terminals. But one big drawback for Apple Pay so far is that it’s limited to the latest iPhones, the 6 and the supersized 6 Plus. Plenty of those phones are selling, but Apple Watch broadens the range, since it can pair with the previous generation 5, 5c and 5s. That makes the Apple Pay service available to a lot more consumers.

Apple hasn’t released much information on how the so-called smart watch will work, especially with Apple Pay, but early indications are it will be controlled by an app users will load on their paired iPhone. This app will also allow users to set up a four-digit passcode they’ll need to enter to make payments through the watch. We’ll know more next month.

Another encouraging indicator is that NFC terminals are shipping, and being installed at the POS, in ever increasing numbers, partly in response, of course, to the dreaded EMV deadline coming up in October. In the United States alone, some 1.5 million NFC-capable units shipped last year, raising the installed base to 3.7 million, according to estimates from Berg Insight, a Gothenburg, Sweden research firm that follows the global NFC market.

The trouble has always been that not many of those devices have their NFC function turned on. But that’s changing. Worldwide, some 9 million terminals were processing contactless payments at the end of 2014, triple the number counted two years earlier, according to Berg Insight, which did not break out a number for the U.S. The firm took account of contactless transactions on Visa payWave, MasterCard PayPass, and UnionPay QuickPass cards.

More iPhone models capable of doing Apple Pay, plus more POS terminals accepting contactless payments. Just maybe that adds up to better prospects for NFC.

John Stewart, Editor

john@digitaltransactions.net