Monday, September 19, 2011

NFC - What Apple does next? Buy Amex?

Chatting around on the iPhone 5 I have to say its all rather dull, yes they'll fix the antenna, yes the camera might get better and the processor faster. But really is that a big deal? So what could Apple announce either now or next year that would really blow people away.

I travel a lot, and one thing I see around Europe is the rise of NFC, so the use of 'smart'cards on the Underground, Metro, Dutch rail and elsewhere. The technology is basically the same everytime, Chip with some form of RFID or NFC is swiped over a sensor and your trip is paid for. Around the globe we are seeing MasterCard and Visa both include NFC to their cards so you can just wave the card around and get charged for things.

Now MasterCard and Visa get a percentage of the transaction, there are normally companies providing the Smartcard services for public transport. But what stops Apple creating or leveraging a 'standard' for NFC to cover these cases. Think 'Airplay' over six inches. Now Apple have said NFC won't be in iPhone 5, which indicates... well not much. But the key question here isn't so much when NFC will be included but the impact this will have on the market.

Lets say in the UK my Oyster card can be replaced with my iPhone and my iPhone can be linked to my Credit Card. Suddenly Apple are taking a slice not just of my iTunes transactions but of pretty much everything I do, and they have clarity via GPS on where I'm doing it. I can also charge via this system on the French, Dutch, etc networks without having to buy a ticket or going to a ticket office, think of the staff savings....

Now for fraud reasons it would be good to track the GPS so if I do an iPhone transaction in Utrecht and then there is a card transaction in London 10 minutes later then the odds are that one is fraudulent. This fraud protection would give Apple the reason to store and analyse this information, and of course provide it to the credit-card provider. All very open, if more than a little big brother.

The point here is that integrating NFC into the iPhone and driving a standard due to the massive market volumes that the iPhone has, something no-one else can currently do unless Google dictates hardware standards a bit more, would mean that governments and companies could massively reduce the timescales for adopting NFC and start decreasing their operating costs by relying on iPhone users to self-serve. This would have a knock-on effect of driving iPhone sales because with iPhone being the 'preferred' mechanism it becomes simpler to own one rather than not. Thus Apple provide to the credit card companies and other organisations a platform for NFC which gives Apple revenue and companies the leverage that a standardised market brings (think 802.11x against proprietary approaches).

That then got me thinking. Apple quite like being in control and have $76bn in cash, what could you buy for that which would really kick this up a level? How about VISA($63bn), Mastercard($44bn) or American Express($60bn) themselves? Apple could buy, for cash, anyone of these. So instead of having an open system for all of the providers it suddenly would become a closed system where you are best off having a specific card provider if you get an iPhone. Given the demographic target of Apple, and their larger charges over the competition, AMEX would seem to be a good fit.

Sometimes its scary when you join the dots.

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