The next generation of iPhone hasn't even been announced yet, but you will find no shortage of prognosticators predicting what features the new device will contain. Among the features predicted for the iPhone is NFC, which is commonly used for mobile payments where the payer holds an NFC enabled card or device in close proximity to a reader terminal and within milliseconds the transaction is verified and processed.
Completing retail transactions with a cell phone is not common in North America at the present time, but it is arguably a feature that has a lot of potential traction and should catch on quickly if the infrastructure were in place. At the moment, NFC appears to be the leading technology that will enable mobile transactions - provided the main players on the manufacturing, processing, and retailing side adopt the technology. At this time Google is the first major adopter of NFC, having embedded NFC capable chips in their Android Nexus S smartphone manufactured by Samsung. Retail trials are underway in Texas and Utah by Isis, and a collaboration of retailers including Wal-Mart and Target are looking at developing an NFC mobile payment transaction platform.
But what if there were another technology that was capable of enabling secure, low power mobile transactions? What if this technology held advantages over NFC, and more importantly, what if Apple adopts it for the upcoming iPhone instead of NFC? Some might say that it would be presumptuous of Apple to assume that consumers will accept a technology simply because Apple endorses it. But what if the parent of this technology has already been accepted by consumers and has already been ubiquitous in cell phones for many years?
Bluetooth Low Energy (BLE) is a feature of Bluetooth 4.0 and offers similar functionality to NFC with some distinct advantages. According to retail analyst Pablo Saez Gil of ResearchFarm, Apple might use BLE in favor of NFC to enable a payment system in its next generation of mobile devices. In fact, Apple has already designed Bluetooth 4.0 into all of its products including the iPhone which would obviate any hardware changes.
So, what exactly is BLE and how can it compete with NFC? BLE is a feature of the latest generation of Bluetooth (4.0) and allows for extremely low power operation enabling months or even years of operation with a coin-cell battery. Communication is secure, operable up to 50m, and link set-up time has been reduced to 3 milliseconds as opposed to up to 6 seconds with Bluetooth 2.1. The main advantage is the allowable distance for usage over NFC – 50m compared to 200mm for NFC.
To use BLE in a mobile payment environment, cloud based authentication and processing would be used to complete the process. A BLE enabled mobile device would simply communicate with a retail terminal to set-up a secure link for PIN authentication and purchase acceptance. Verification and processing would take place in the cloud.
This is where iWallet and iTunes comes into play. Apple has been patenting methods of mobile transactions and transaction rules lately which lends credence to the speculation that a future iPhone will include some kind of payment feature. The real value of a mobile payment system is the transaction processing along with the small per payment processing fees that could quickly add up over time for each consumer in the system. Developing a trusted payment ecosystem is not an easy task, and Apple already has this in place for the most part with iTunes. Prepaid iTunes cards are available at retail outlets around the world and provide a user with the ability to top up their account – especially handy for those who are reluctant to trust new technology with their credit card information.
At this point, it’s still all speculation as to which if any payment feature Apple will add to its next generation of phones and tablets. But you can’t help to wonder what disruption to NFC development would result from Apple taking the BLE route rather than the apparent mainstream NFC. It certainly wouldn’t surprise Apple watchers to see the company choose a less obvious choice over something that it’s main competitor has already committed to adopting. If this theory holds true, will NFC lose its steam and fall out of favor with consumers and retailers, or would the same happen to BLE.
Whether NFC or BLE, there is a lot at stake for manufacturers and retailers given the investment required. One thing is certain – greater choice for consumers results in better service, lower prices, and faster advances in technology.