Apple forgoes NFC m-payment integration with new iOS 5

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jason ankenyThe wait is finally over: Apple (NASDAQ:AAPL) officially unveiled its newest iPhone during a media event Tuesday. Dubbed the iPhone 4S--not the iPhone 5, as most anticipated--the smartphone heralds the arrival of the new iOS 5 operating system update, which brings with it more than 200 new features including the iCloud content sync service, Siri voice-activated controls and the location-enabled Find My Friends tracking app. No less notable is what iOS 5 doesn't include: Near Field Communications-enabled mobile payments integration.

Not so long ago, it seemed like a mortal lock that iOS 5 would feature NFC. I even predicted as much as 2011 dawned. Apple hired NFC veteran Benjamin Vigier in August 2010 on the heels of a series of NFC-related patent filings, after all, and conventional wisdom stated the company had to keep pace with archrival Google (NASDAQ:GOOG), which introduced NFC integration with version 2.3 of its Android mobile operating system. Moreover, rumors swirled that Apple's NFC ambitions far outstripped contactless payments and mobile commerce as a whole: Insiders buzzed that Apple was hard at work on an NFC-enabled remote computing solution allowing users to wave their iPhone at any compatible Mac, loading all their personal applications, data and settings from the smartphone to the desktop. Which sounds amazing--and, quite possibly, too good to be true.

Doubts about Apple's commitment to NFC first surfaced in March 2011. At that time, The Independent reported Apple had told executives at several U.K. mobile operators that it would not embed NFC technology into the next iPhone, citing apprehension over the absence of clearly defined industry standards. Roughly a month later, Apple began selling mobile payments startup Square's credit card reader unit--Square enables users to accept credit and debit card purchases anywhere and anytime via iPhone, iPad or Android smartphone by swiping the card through a small dongle that plugs into the device's audio input jack, a method that does not rely on NFC services.

Apple's reluctance to incorporate NFC into the iPhone 4S will further fuel recent criticism of the technology. Speaking last week at the Mobilize conference in San Francisco, Square COO Keith Rabois argued NFC doesn't offer a value proposition, claiming "I've never met a single merchant in the U.S. who says 'I want this NFC thing.'" PayPal has also gone on the offensive--during a recent earnings call, John Donahue, CEO of parent firm eBay, joked NFC stands for "not for commerce," while PayPal director of communications Anuj Nayar has claimed NFC is still three years away from mass adoption, a veritable lifetime in the ever-accelerating world of high-tech.

But NFC-enabled mobile commerce has made enormous strides within the last 30 days alone. In mid-September, Google officially launched its NFC-based Google Wallet, which allows consumers to make purchases by tapping their Android smartphone at all 300,000-plus MasterCard PayPass-enabled merchant terminals. For now, Google Wallet is limited in scope, going live across all Sprint Nextel (NYSE:S) Nexus S smartphones running Android OS version 2.3.4. But Google has big plans for the platform and has said it will expand beyond point-of-sale transactions to enable consumers to store coupons, loyalty cards and gift cards within their phone--when users tap to pay, the device will automatically redeem offers and earn loyalty points. Google has also said it will eventually expand Google Wallet to boarding passes, event tickets, ID cards and keys.

No less significant, Isis--the forthcoming nationwide m-commerce network spearheaded by Verizon Wireless (NYSE:VZ), AT&T (NYSE:T) and T-Mobile USA--announced last week that six device manufacturers including HTC, LG, Motorola Mobility (NYSE:MMI), Research In Motion (NASDAQ:RIMM), Samsung Mobile and Sony Ericsson have committed to implementing Isis NFC and technology standards in future device rollouts, a huge boost toward mainstream penetration and adoption. Isis also will partner with contactless technology firm DeviceFidelity to extend m-commerce capabilities to consumers who own or purchase smartphones without built-in NFC support.

Apple's decision to withhold NFC capabilities from the iPhone 4S does not mean future iterations of the device won't support the technology, of course. It's Apple--anything can happen. Nor does it mean NFC is now a lame-duck competitor to Square, PayPal and rival mobile commerce options. But the reality is this: If Apple had incorporated NFC support into iOS 5, no one would be doubting the technology's prospects moving forward. The buzz surrounding NFC is still loud, but right now, Apple's silence on the subject is deafening.--Jason

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