Why No NFC In The iPhone 5 Should Work Out for Apple

When Apple revealed its new Passbook mobile payment system as part of the iOS 6 preview in June, many industry watchers expected the addition of near-field communications capability on the next version of the iPhone that would compliment Passbook. That new iPhone is here, but there's no NFC feature in sight. The question now is Apple being shrewd, or is it about to miss out on a real opportunity?

In an interview with All Things Digital, Phil Schiller, Apple senior VP, revealed that Apple's decision to leave out NFC was based very much on Passbook:

It's not clear that NFC is the solution to any current problem, Schiller said. "Passbook does the kinds of things customers need today."

Schiller was communicating a basic fact about NFC-based payments: they aren't universally accepted yet. To accept NFC payments - where an NFC-equipped card or device is bumped or waved near an NFC receiver - a merchant has to have the receiver terminal in the first place. Passbook, on the other hand, is a purely software-based payment system already in the phone; all you need is a connection to the Internet through local Wi-Fi or a cell connection.

Schiller may say it's not solution, but NFC is already onboard of several non-iOS smartphones, and even the carriers are getting on board. Isis is an upcoming joint mobile payment venture from AT&T Mobility, T-Mobile USA and Verizon Wireless that will use NFC features in smartphones.

But while the phones, services and carriers are all eager to get on board with NFC - some assuredly with hopes of scraping off some transaction revenue - merchants have been more cautious. First, there's that added expense of new equipment. Even if that expense were subsidized, there's still training and time needed to install.

Second, merchants may be wondering what's in NFC for them?

NFC may afford some convenience to some customers, but if it doesn't increase sales in a meaningful way it's going to drop to a lower point on a business' priority list. Getting more sales and customers is the big win, and NFC might not help with that when something like Passbook or other payment systems like Square could be implemented with less cost and hassle.

This is not to say NFC will never happen. It's very much coming. But Apple seems to be pacing its own hardware development to match that of real-world NFC deployment.

It's a safe middle road to take: while NFC is revving up, iPhone users can grow accustomed to Passbook's features. Then, when Apple introduces NFC down the road, it will almost surely integrate well with Passbook and be a much smoother transition.

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