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What's next for NFC after Google Wallet overhaul?

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Jason

A new book titled I Don't Know: In Praise of Admitting Ignorance (Except When You Shouldn't) explores why humans so frequently pretend we know what we're talking about, even when we have absolutely no clue. "I think those words ['I don't know'] can be so incredibly liberating," author Leah Hager Cohen told NPR. "They can just make your shoulders drop with relief. Once you finally own up to what you don't know, then you can begin to have honest interactions with the people around you." In homage to Cohen, I'd like to confess that I've been thinking about the future of Near Field Communications-enabled mobile commerce and I've come to the realization that I have no idea where it's heading. A series of recent developments have hopelessly muddied the waters, at least in the short term.

Just last week I expressed confidence that Apple's (NASDAQ:AAPL) iOS 8 will integrate NFC support whenever it arrives next year. The smoking gun: A patent application recently uncovered by AppleInsider that indicates Apple has been working on combining NFC functionality with biometrics technologies the company absorbed when it acquired digital security firm AuthenTec in mid-2012, outlining potential short-range communications capabilities including wireless payments and interactions with vending machines. It's still clear to me that Apple is gearing up to make its mobile payments push: Touch ID, a capacitive security sensor embedded in its iPhone 5s home button, also supports purchases across Apple's iTunes digital storefront, setting the stage for expanded m-commerce capabilities. But some pundits contend that iOS 7's new Bluetooth-based iBeacons technology also could support mobile purchases while sidestepping NFC altogether, although it's still uncertain exactly how that might work. Will Apple ever embrace NFC? I don't know.

This week Google (NASDAQ:GOOG) extended its Wallet mobile commerce platform to all smartphones running Android 2.3 and higher, eliminating a requirement that compatible devices must contain a NFC chip with a secure element. The revamped Google Wallet app enables users to send money to any U.S.-based contact with an email address. It also doubles as a virtual container for customer loyalty cards, a model popularized by archrival Apple's Passbook for iOS. Wallet users may view their loyalty status and rewards point balance, and moving forward, the Google Now virtual assistant will alert them when they have a saved loyalty program near their current location. "To add your cards, simply scan the barcode or input the card number into the app," explains Google Wallet Director of Product Management Peter Hazlehurst. "The next time you're at the store, you can earn points for your loyalty program by scanning the app at checkout." 

When Google Wallet first launched in May 2011, the app enabled consumers to make purchases by tapping their NFC-enabled Android smartphone at more than 200,000 MasterCard PayPass-enabled merchant terminals across the United States. Wallet's dependence on NFC limited the service to a small number of smartphones, however: While Sprint (NYSE:S) and U.S. Cellular sold Android devices supporting the Wallet app, Verizon Wireless (NYSE:VZ), AT&T Mobility (NYSE:T) and T-Mobile US (NYSE:TMUS) did not, dramatically limiting adoption. The three non-participating carriers are instead rolling out their own rival NFC payment network, Isis, which is slated to launch nationwide later this year following consumer trials in the Austin, Texas and Salt Lake City markets.

But Google isn't giving up on NFC, at least not yet. The company said Wallet will continue to support NFC payments moving forward. "If you have one of 29 different NFC-enabled devices, you can continue to tap and pay at hundreds of thousands of U.S. locations, while also enjoying the new Wallet features," Hazlehurst said. "We also have more NFC-enabled devices on the horizon as we continue to invest in NFC with our partners." Why is Google pledging to commit time, energy and cash to NFC when it's clearly a hindrance to Wallet's growth? I don't know. And now comes word that Google is expanding to Wallet to iOS--what impact will that have on Apple's m-commerce roadmap? Again, I don't know. 

Then there's Isis itself. Close to a year after Isis kicked off mobile wallet trials in late 2012 in partnership with financial services firms Capital One, Chase and Barclaycard, Capital One revealed this week that it is terminating support for the platform ahead of its nationwide rollout. "Our pilot test with Isis will be coming to an end soon," a Capital One spokesperson said. "We have gained valuable insights from our customers who were among the first to pay with the Isis Mobile Wallet. We continue to engage with Isis on the future of mobile payments."

What's ahead for Isis? Depends on whom you ask. "Capital One dropping its support for Isis is significant in what it telegraphs about the problems issuers will continue to face with the wallet provider," Yankee Group analyst Jordan McKee told Mobile Commerce Daily. "Issuers must pay each time a consumer loads their card onto the wallet. The caveat is that whether or not a consumer uses the card, the issuer must pay to have it in the Isis Wallet. Card issuers are interested in encouraging card spend whereas Isis is purely interested in getting consumers to link their cards to the wallet. This conflict of interest will continue to be problematic."

But Aite Group senior analyst Rick Oglesby believes that inroads made by companies like PayPal and Apple could benefit Isis moving forward. "Many financial institutions and merchant acquirers see PayPal and Apple as threats and the moves that these companies are making could cause financial institutions, payment networks and acquirers to accelerate their mobile payments efforts in response to the perceived threat," Oglesby said. "Since Isis is looking to partner with the financial institutions, payment networks and acquirers, the moves made by Apple and PayPal could drive partners into Isis' embrace."

Isis hasn't wavered on its commitment to NFC, but it will be fascinating to see what steps the company takes from here. This summer, Isis vowed to expand beyond Android to support Apple's iOS, Microsoft's (NASDAQ:MSFT) Windows Phone and BlackBerry (NASDAQ:BBRY). The firm hasn't revealed how it plans to roll out to iOS without NFC support in place, but obviously some sort of adjustment is necessary--unless Isis knows something about Apple's NFC plans that the rest of us don't, which is entirely possible given Apple's ties to the three operators building out the mobile wallet service. Let's be honest: Apple, Google, Isis and a handful of other major players are the only ones who know for certain what the future holds for NFC. The rest of us are just taking stabs in the dark.--Jason

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