Will Apple, Google Lead Mobile Payment Revolution?

By adding near-field communications to the iPhone and iPad, Apple -- along with Google -- may provide the spark needed to ignite mainstream use of mobile payments.
Richard Doherty, director of consulting firm Envisioneering Group, believes that the next versions of the iPhone and iPad will include support for near-field communications (NFC). Doherty, citing Apple engineers who are working on the designs, says NFC will be in Apple products released this year.

NFC mobile payments are made by adding a small short-range wireless radio to cell phones that can be scanned by a retailer at the point of sale. Once scanned, the chip tells the phone to debit money from a checking or credit card account paired with the device and send it to the retailer.

Apple has also created a prototype retail NFC scanner, which could be used by small business (think Main Street) to accept mobile payments. Apple may even subsidize the mobile payment device in order to help boost adoption by retailers.

This information from Doherty follows Google’s announcement from December 2010 that its own Android smartphone platform will also support NFC moving forward (Android 2.3 Gingerbread and up). With Apple and Google backing NFC, 2011 could finally be the year when mobile payments start to expand beyond limited trials.

It’s not a simple process, however.

In order to make payments via NFC, an entire ecosystem of players must cooperate. That includes network operators, handset makers, banks, credit card companies, application developers, and so on. (We’d be kidding ourselves to think that they don’t all want a piece of the mobile payment pie.)

This type of effort is already partially underway in the U.S. through a joint venture called Isis. Network operators AT&T, T-Mobile and Verizon Wireless are backing Isis, as are Discover Financial Services and Barclaycard U.S. (MasterCard and Visa, the two biggest credit card issuers in the U.S., are not backing Isis, however.) Assuming Doherty’s sources are right, adding Apple to the mix could be the catalyst to kick the NFC mobile payment ecosystem into high gear.

Both Apple’s iPhone and Google’s Android platforms are extremely popular sellers in the U.S. Apple sold 16.24 million iPhones in its most recent fiscal quarter, and Google says it is activating 300,000 new Android handsets per day. Simply getting the tech into the hands of mainstream smartphone users is a huge hurdle to overcome, but Apple and Google have the mass-market appeal to make it happen.

The bigger question is, will the other pieces of the puzzle fall into place as easily? Probably not. Visa and MasterCard are working on their own mobile payment systems, and other entities, such as PayPal, are exploring other avenues as well. Without broad cooperation between the multitude of players, NFC isn’t going to get anywhere fast. Can Apple and Google bring them all to the table and get them to move forward? It’s possible.

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