Apple iPad 2 And iPhone 5 ‘Aim to Replace Cash or Credit Cards’

Apple’s forthcoming iPad 2 and iPhone 5 are expected to include a mobile payments feature that the company hopes will replace cash and credit/debit cards for millions of Apple’s fans.

Apple Inc. plans to introduce services that would let customers use its iPhone and iPad computer to make purchases, said Richard Doherty , director of consulting firm Envisioneering Group. Photo: Thomas Moore/Flickr

Apple Inc. plans to introduce services that would let its customers use its iPhone and iPad devices to make purchases, boosting mobile commerce and potentially giving the company a big piece of the U.S. trillion-dollar transaction industry, according to the Bloomberg’s report.

Buying a cup of coffee with the iPad 2  or movie tickets with the iPhone 5 could be an option in the near future. Such services to make mobile payments would be dependent on near-field communication (NFC), a technology that can beam and receive information at a distance of up to 4 inches.

Richard Doherty, director of consulting firm Envisioneering Group, said Blooomberg that “the services are based on Near-Field Communication due to be embedded in the next iteration of the iPhone for AT&T Inc. and the iPad 2.” Both products are likely to be introduced this year, he added, citing engineers who are working on hardware for the Apple project.

“I do believe the iPhone 5 will have NFC embedded,” said Bill Gajda, Visa’s head of mobile innovation, one of those in discussions with Apple. Apple Inc.’s  spokesperson declined to comment on this story.

Apple’s service may be able to tap into user information already on file, including credit-card numbers, iTunes gift-card balance and bank data, said Richard Crone, who leads financial industry adviser Crone Consulting LLC in San Carlos, California.

Taylor Hamilton, an analyst at consultant IBISWorld Inc. added: “That could make it an alternative to programs offered by such companies as Visa Inc., MasterCard Inc. and EBay Inc.’s PayPal.”

“NFC is definitely one of the technologies that’s getting a lot of attention, but ultimately the consumer is going to choose,” said Charlotte Hill, a spokeswoman for PayPal, owned by San Jose, California-based EBay.

Ed McLaughlin, chief emerging payments officer at MasterCard, said the company is “running the world’s fastest payment network, and that doesn’t need to be re-created.” MasterCard sees NFC “as an opportunity to partner with organizations” and already has run NFC payment trials around the world.

There have been many attempts in recent years to introduce a cellphone-based payment system based on NFC, but they’ve been hampered by a dearth of phones with the technology and a lack of support from service providers.

However, those barriers are slowly being lifted – Google notably built NFC into the Nexus S phone, and new NFC systems have major backers – lending weight to the possibility of an NFC-equipped iPhone.

Samsung and other handset makers who use Google’s Android smartphone software are already putting NFC in new models, and Research in Motion (RIM) and Nokia are embracing the technology as well.

Apple could bring the system to a broad audience rapidly by putting it in all versions of its phones. Owners of iPhones are typically heavy users of data and their upscale demographic makes them a desired target for businesses.

Apple also brings to the table credit card numbers it has on file for more than 100 million users of iTunes, the digital store for entertainment and software downloads. That could give it the leverage to extract better terms from card issuers, who typically tack on fees of roughly 2 per cent to retailers who accept their systems.

TechCrunch’s MG Sieglers noted that Apple has also another incentive to put NFC in its mobile devices. If Apple were to add such abilities to its mobile products, “it could change everything. It could transform Apple from the biggest technology company in the world, to the biggest company in the world, period. By far.”

In addition to purchases, NFC tech on phones has the potential to let users easily access merchants’ rewards programs and even enable targeted advertising.

Advertisers would likely pay a premium for personalized ads that specifically promote services directly where customers are spending money. Apple launched an advertising platform specifically for its iOS devices, called iAd, last year. [via Financial Times, Tech Crunch and Bloomberg]

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