Jan 25

iPhone Payments via NFCIf you believe the folks at Bloomberg, Apple is planning to include NFC – or Near Field Communication – in the next generation iPhone and iPad.  Great! 

So… what the heck is NFC?

NFC is an established technology that allows, essentially, the sharing of data between two equipped devices at short range (about 4-inches). While the possible applications for NFC are many, inclusion in their next-gen mobile devices suggests that Apple may be planning to get into the payment processing business, allowing iPhone and iPad users to pay for products right from their iTunes account the way they currently pay with a credit or debit card. 

The Nexus S, the current flagship Android phone from Google and Samsung, already boasts the technology, though not much has come from its inclusion given the phone’s relatively low number of users.  But on the iPhone, NFC could see its first wide-range use.

Here’s how it could work. 

You already have a credit card on file with Apple to make iTunes purchases.  Apple could link that credit card to a new payment system which would allow you to use the iPhone and its linked iTunes account to pay for products and services at any location that supports NFC payments.  You’d check out at, say, Target, and the terminal you now use to swipe a credit or debit card would also be able to process your payment by waving your iPhone near the device and making some onscreen authorization.  This would, of course, require the terminal to be NFC-capable. 

Aside from traditional in-store checkout, the service could also be used for vending machines, payment kiosks, Redbox, toll booths, parking decks, taxies, etc.

In addition to the processing fees Apple would charge for transactions, there would be an added benefit to doing this: the company would be able to collect information about where a user spends money – and perhaps even the products purchased – which would help the company’s iAd service deliver more targeted advertisements.

On the iPad side, it’s more likely that the inclusion of NFC would be for receiving payments rather than making them (picture waving your 10-inch iPad around to buy a year’s supply of ketchup at Sam’s Club).  Restaurant servers, repairmen, contractors, sales clerks, and countless other types of workers could accept payments right from a 2nd Generation iPad.

Of course, if the NFC chip were accessible to app developers, VISA, MasterCard, PayPal, Google, and other established payment services could release iOS apps that would give users the ability to pay for items through existing accounts: debit cards, credit cards, Google Checkout, etc.

Aside from payment solutions, inclusion of NFC could also allow easy file sharing between users.  You could send your contact information to another iPhone user by simply putting the phones in close proximity, or share photos, calendar information, and coupons.  It would also be possible to send money to a friend with an iPhone to split the price of a meal, for example.

If the NFC rumor is true (and Bloomberg wasn’t the first to suggest this), it’s also possible that Apple may be including the technology only to allow companies like VISA to offer an iPhone payment option, at least in the beginning.  But given the fact that Apple already has millions of customers that use their iTunes account to make purchases every minute of every day, that is difficult to believe.

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