Apple’s timing of their new Apple Pay, and the inclusion of near field communication (NFC) technology in their latest devices is brilliant, says PanoDaily writer Michael Carney. But why did the company decide to include a decade-plus old technology in their mobile payments initiative?
The answer to that question has to do with the difficulties of driving market adoption around new hardware standards. Like most communications standards, NFC requires that two parties have access to the technology in order to work. For example, if one user has a new iPhone 6 with NFC, but another has an older iPhone 5, no dice when it comes to beaming data back and forth over the protocol. The same is true for merchants and consumers, which is where things get particularly sticky for Apple Pay.
For Apple Pay to work, it needs to function basically anywhere a user would want to pay for a product or service. Carney says that currently there are just 220,000 NFC-enabled merchants in the US today. (Out of roughly 9 million total merchants in the country.) So why would Apple make the move to NFC?
Carney notes that there is a major change in the payments landscape that will require all those merchants to deploy new payment hardware.
“As of October 2015, any merchants that do not support EMV credit cards – smart cards with integrated circuits that enable point of sale authentication and help prevent fraud – will be liable for the fraudulent use of counterfeit, lost, and stolen cards.”
EVM cards are read at point-of-sale terminals by reading a chip in the credit or debit card, rather than with a swipe of the credit card to read a magnetic stripe. Customers will then enter a PIN to authorize the transaction. The transactions are much more difficult to counterfeit than standard credit and debit cards.
While merchants are replacing their payment equipment, they’re likely to go for all the options, and after the Apple Pay announcement, NFC is likely to be at the top of the features list for new payment terminals.
Carney notes that even with Apple’s marketing machine, they might have had a problem forcing NFC down the gullet of merchants and consumers. (After all, look at the small NFC adoption rate do far, even though numerous Android devices have had NFC capabilities) But, since just about every merchant will be upgrading their systems anyway, Apple’s timing is excellent.
