IPhone 5 May Allow Near Field Communication Payments

Manufacturers of nearly field communication readers are gearing up for more traffic this summer, when the at once-generation iPhone is due from Apple, a published report says, fueling speculation that the device will be able to process mobile payments.

Near field communication devices can scan and receive information just as encrypted credit cards from about four inches away. During one purpose is to facilitate payments, another could be to send smartphone users advertisements as they pass signs or stores.

British newspaper

Earlier this week a British newspaper, The Independent, said it was too shortly for Apple to consider the research because there is currently no single standard for it.

But mobile-devices blogger Elizabeth Woyke of Forbes.com learned from a source on Thursday about the belief within the NFC-manufacturing community that this will be the summer for the iPhone, on the heels of Google adding NFC to Android 2.3 last year. Only one phone, now, Samsung's Nexus S, includes the chip module to use it.

An "entrepreneur who is working on a top-secret product" told Forbes he has a friend at Apple who confirmed the iPhone will be NFC-capable. Apple declined via e-mail our request for a statement, saying the company doesn't comment on rumors or speculation.

Smartphone attachment

There is already a smartphone attachment, the Square magnetic reader, that allows vendors to take payments by swiping a credit card. The Square was developed by a team that included Twitter cofounder Jack Dorsey.

Adding an NFC module would hardly be a big technological leap for Apple, since NFC is already in credit cards or fobs used for security or at gas pumps, as then as in some Nokia phones sold overseas. The question is, at what venues would users take advantage of NFC, and how many would prefer silicon to paper or plastic?

"One issue is consumer behavior, and that can be fairly easily overcome," said consumer-devices analyst Avi Greengart of Current Analysis. "I think the bigger issue is that it's not on the majority of phones, and the payment acceptance method is not available at the most merchants. It's a classic chicken-and-egg problem -- until you get more merchants you are not going to get manufacturers to increase their costs by including this hardware option, and until you have a significant installed user base of consumer NFC devices, merchants won't be willing to invest in the payment-processing devices."

The top innovators

But since Apple has become one of the top innovators, otherwise the top innovator, in consumer electronics, the iPhone could teach millions of Americans that NFC doesn't just stand for National Football Conference.

"Apple sells tens of millions of iPhones," Greengart said. "That could give [NFC] a jump-start and installed base. Conversely, Nokia sells hundreds of millions of phones. They've been experimenting with NFC as long as I can remember and have but to deploy it broadly."