January 25, 2011, 2:22 PM — The United States has been slow to adopt the concept of near-field communications (NFC) technology or the idea of using a mobile phone as a method of payment, but it is gradually catching on. New reports suggest that the next-generation iPad and iPhone will be equipped with NFC capabilities, enabling you to use your iOS device to make purchases.
A story from Bloomberg cites sources indicating that Apple is building the NFC technology into the iPad 2 and iPhone 5. It also reports that Apple is working on the payment infrastructure behind the scenes necessary for actually making payments with an iOS device.
Starbucks recently rolled out a system allowing patrons to make purchases using an iPhone. However, the Starbucks approach is proprietary and does not use NFC. Starbucks connects an iPhone app with a funded Starbucks card and allows customers to pay by scanning a bar code image from the iPhone display. Still quite handy--but not as much as true, widespread NFC adoption.
Building the NFC capabilities into the iPhone or iPad is only half the battle, though--maybe less. Google already has an NFC-capable Android smartphone with the Nexus S, yet that hasn't seemed to spark any sort of contactless payment revolution just yet.There are two more critical pieces of the contactless payment puzzle that must also be in place in order for the NFC technology to have any real-world value.
First, there has to be a creditor backing the NFC payment. The device has to be connected with a bank account, or a credit card, or with some sort of wireless carrier-backed system that actually funds the transactions.
Second, merchants have to be onboard with the concept. For example, there are already many credit and debit cards equipped with contactless swiping functionality, but very few vendors that have the hardware to support it. Having an NFC smartphone without merchant support is like having a Flex Fuel vehicle without any gas stations that actually offer the E85 fuel to take advantage of it.