Apple’s Next iPhone Could Include a Feature Android Users Have Had for Years
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NFC is what gives Samsung’s Galaxy phones the ability to transfer files with a quick tap. More importantly, it’s been the key technology behind mobile payments.
Isis, the mobile payment solution backed by the major US cellular companies (Verizon, AT&T and T-Mobile), said Tuesday that it would be supporting Apple’s iPhone. While it’s possible that Isis could be using an alternative technology for the iPhone, this strongly suggests that the next iPhone will ship with NFC.
The next big thing: Isis?
Isis is an NFC-based mobile payment solution that (theoretically) eliminates the need to carry a credit card. A user touches their smartphone to an NFC-enabled credit card terminal, punches in their pin number, and the credit card linked to the app is charged for the purchase.
In many ways, the app is nearly identical to Google Wallet, the search giant’s mobile payment solution. Google has poured hundreds of millions of dollars into Google Wallet, but the service has failed to catch on.
In large part, that’s because the carriers that are backing Isis have blocked Google Wallet on their phones. If you’re a Verizon, AT&T or T-Mobile subscriber (the vast majority of US smartphone users), you can’t use Google Wallet even if your phone supports it.
But as an owner of a Google Wallet-enabled phone running on Sprint’s network, I can tell you that there are other limitations.
For starters, the number of NFC-equipped credit card terminals is limited -- the majority of retailers do not have them. Moreover, there are lot of situations where paying with your phone just isn’t practical -- restaurants, for example, where you have to hand your card over to a server.
And because the number of Google Wallet-enabled merchants is limited, you have to keep your wallet on you at all times anyway. Even when I do find merchants that accept Google Wallet, I find myself reaching for my credit card out of habit.
The tipping point
But these limitations could be overcome if more people adopt mobile payment solutions like Isis. The more people that are using them, the more likely merchants are to accept them. Thus, Google should actually benefit from Isis’ launch, as should chipmaker NXP Semiconductors (NASDAQ: NXPI), one of the largest NFC chip makers.
In May, when it looked like Google could be abandoning its Wallet project, Motley Fool’s own Tim Beyers warned investors to stay away from NXP:
It’s a very troubling development for NXP...It has been well known for making NFC chips...this probably means that its future in enabling electronic payments is muted.
But Isis could give NFC-based payments a new life. Moreover, it could give NXP a major new customer in the form of Apple.
Apple’s future in mobile payments
Apple has yet to jump on the mobile payment bandwagon, but investors should expect that to change in the coming months. On its earnings call back in April, CEO Tim Cook told Piper Jaffray analyst Gene Munster that the mobile payment revolution was in its “infancy.”
Munster has been banking on Apple to get into the mobile payment industry, saying that there was an “outside chance” that the next iPhone would include an NFC chip. The Cupertino tech giant purchased AuthenTec in 2012, leading observers to expect the company’s fingerprint scanning technology to make its way into a future iPhone.
But how much could Apple benefit from mobile payments? Maybe not as much as investors think. After all, if the carriers have blocked Google’s Wallet in favor of their own system, why would they allow Apple to get away with something similar?
Apple investors should keep a close eye on Isis’ launch, and how it works with the iPhone. It’s possible that the winners in the mobile payment revolution could be the carriers -- not the phone makers.
Isis, mobile payments, and NFC
Unless Isis is preparing to incorporate another (as of yet unnamed) technology, investors should see the announcement of Isis’ iPhone support as evidence that the next iPhone will ship with an NFC chip.
That could benefit NXP, which makes NFC chips, and even help Google by further popularizing NFC-enabled credit card terminals.
But ultimately, the technology companies might not be the ones benefiting from mobile payments, as many investors may have assumed. Instead, with Isis, it could be the carriers raking in the fees.
At any rate, the mobile payment revolution is just getting started, and tech investors should be prepared for further developments.
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Joe Kurtz has no position in any stocks mentioned. The Motley Fool recommends Apple, Google, and NXP Semiconductors . The Motley Fool owns shares of Apple and Google. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!