John Paczkowski

Recent Posts by John Paczkowski

NFC Might Not Make It Into iPhone 5

Though it would certainly make a lot of sense for Apple to add support for near-field communication technology (NFC) to its next generation iPhone, it’s probably not going to happen. That’s the word from Bernstein Research analyst Toni Sacconaghi, who believes Apple will forgo supporting NFC on its iOS devices until consumer adoption is certain and it’s reached a critical mass with merchants.

Currently, a very few U.S. merchant locations support NFC-based payments, which means the ramp-up to a broad NFC infrastructure will likely be a long one.

“NFC-based mobile payments require NFC-capable POS terminals,” Sacconaghi wrote. “Only 51,000 retail locations support contactless payments (per Verifone’s 10-K); given that First Data alone deals with 4.1M merchant locations in the U.S. this suggests current penetration of just over 1 percent of merchant locations. Clearly, a higher critical mass is needed before mobile payments would take off.

To Sacconaghi. that means NFC is probably not an immediate top priority for Apple.

“We do not expect the iPhone 5 to feature an NFC-based payments solution, and instead expect Apple will evaluate and come to market with partners or a complete solution later, perhaps when NFC infrastructure is more established,” he said in a note to clients. “We note that Apple did not release the first cloud-based music offerings, or the first 3G or LTE handsets, and entered mobile advertising only after Google bought AdMob–instead, the company has made its name from re-inventing MP3 players, smartphones and most recently tablets/netbooks, and would retain the option to eventually do the same with mobile payments.”

Once NFC is ubiquitous and Apple moves ahead with NFC support in the iPhone, though, the opportunity is substantial–an incremental $4 billion to $9 billion annually, he estimates.

Sacconaghi’s report follows similar assertions made to the Independent earlier this year by sources at some big U.K. wireless carriers who claimed Apple was forgoing NFC in the iPhone 5 because of the lack of a clear standard across the industry.