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Are NFC-Enabled Mobile Wallets Really the Future?

Topics: Customer Experience, Technology, Trends
Tagged: , ,

“It’s not clear that NFC is the solution to any current problem.”

That’s a quote from Phil Schiller, the Senior Vice President of Worldwide Marketing at Apple. He said that in response to a question regarding the omission of near field communications (NFC) technology in the new iPhone 5.

NFC is a set of radio communication standards for smartphones. It enables smartphones to exchange information by touching them together or bringing them into close proximity. NFC has been widely hailed as the technology that will enable “mobile wallets” to become mainstream. The vision is for consumers to store all of their financial account information on their mobile phone and pay for stuff by logging in to the wallet app on their phone and then waiving it over the register.

Contrary to all the speculation leading up to the iPhone 5 reveal, Apple did not jump onto the NFC bandwagon nor did it jump into the mobile wallet space.


The new iPhone operating system, iOS6, includes an app called Passbook that aggregates all of your gift cards, coupons, and tickets. It’s the perfect landing place for NFC-enabled wallet capabilities. Apple’s competitors are enthusiastically jumping on the NFC bandwagon. Google introduced an NFC-enabled mobile wallet solution—Google Wallet—in May of 2011. Plenty of other companies in the mobile and financial services industries are putting their chips down on NFC. Apple seemingly had every reason to adopt NFC. Why didn’t they?

I think it’s instructive that Apple, a company famous for capitalizing on existing technologies to create profitable new markets, took a pass on NFC.

Despite predications to the contrary, I believe that Apple made a smart choice. Apple is amazingly good at recognizing opportunities to add value to the consumer experience. The ability to buy and play individual songs electronically led Apple to create the iPod. The ability to create a more flexible and intuitive user experience through a touch screen led to the creation of the first iPhone. Apple clearly looked at near field communication and explicitly decided that it did not add value to the consumer experience.

I think that Apple’s right. NFC isn’t the answer to any current problem. It’s a technology in search of a problem. A mobile wallet based on NFC doesn’t offer consumers any compelling value propositions. It’s not radically more convenient—you still have to pull the phone out of your pocket, sign into the wallet app, and waive it over the register. In fact, you could argue that an NFC-enabled mobile wallet presents a whole new host of problems and concerns for consumers. What happens when your phone’s battery runs out? What happens if your phone gets hacked? What happens if, God forbid, your phone isn’t getting a signal? It’s not that any of these problems are insurmountable; it’s just that there doesn’t seem to be a compelling reason for overcoming them.

In the wake of their decision to exclude NFC, Apple seems to be doing fine. They sold five million iPhone 5s in the first three days. Clearly, there aren’t too many consumers boycotting the iPhone 5 because of its NFC snub. In fact, a recent consumer survey suggests that consumers aren’t ready to switch from leather wallets to digital ones anyway.

I think that credit cards will one day be replaced by a dominant new payment product. I think that product will inevitably be based somehow on smartphones and the internet. But until I see Apple jump into the “digital wallet war”, I will continue to think that mobile wallets are a solution without a problem.

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Everyday, Zoot employees are working with the largest, most sophisticated banks in the world to solve their complex business problems. As Zoot employees gain new insights into the financial industry, they will share them with you as a Zoot Staff Contribution to ZootBlog.

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