Tag Archives: apple

Apple and NFC

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Apple and NFC..

Nothing really new here for the NFC crowd. No new information..  Purpose is to paint a picture by which investors can make a call.

Most of the issues associated with NFC today are NOT technical.. but rather business: What value can it bring? Who controls it? Who makes the money? How is it shared? For payments… NFC has been a complete bust (with the exception of Asia). Retailers just aren’t excited about the prospect of paying credit card interchange (3.5%) for the privilege of accepting a mobile payment which funds a 12 party supply chain  (necessary to make NFC work).

The WSJ (July 6, 2012) and I both have consistent information that Apple will NOT be rolling out NFC in the iPhone 5. If true, I believe Apple’s exec team is taking a brilliant approach to be a late follower here. Let everyone else pay the freight to educate the customer, and establish a high level retailer POS value proposition (with associated retail infrastructure). Apple is much better positioned to extend the App Store experience into mCommerce.. and control the customer end-end experience. Apple will also likely expand “selectively” into physical commerce areas like ticketing.

To be clear, I’m not positioning that Apple has run away from NFC.. but there has been no success to date and there is no reason for Apple to run into this space. In order to monetize and sort of physical POS solution, Apple must have a business structure that can orchestrate a very complex “physical commerce” value proposition. Keep in mind Apple doesn’t have much of a sales force to cover advertisers AND retailers globally. Rather than “focus” on the POS, or implementing standard NFC chipsets, I see Apple doing something “unique”… What is it?

I was meeting with senior NFC execs this week, and the consensus view is that Apple will likely redefine phone hardware architecture.  Most of you have read about Apple’s recent patent application which would allow the SIM to be logically placed within the SE. Also there are rumors about expanding the capabilities of the Radio and Controller to also cover Bluetooth functionality. The “value” that an integrated hardware solution? Not that much different than what NFC alone is capable of.. but it would greatly reduce footprint, power, time, and perhaps even expand “throughput” (example Accelerating/bypassing BT pairing: NFC is  424kb/s while Bluetooth V2.1 is 2.1 Mbit/s).

Although far from being an expert in this area, my summary view is that Apple recognizes the need for a secure radio and data store in the device that it can control.  A metaphore for an ID.  How do they want to control this ID? Well they certainly need to secure the wallet access (AuthenTec $356M last week, plus rumored IRIS scanning).

This approach is opposed to that of the carriers all of which are working very hard to “standardize” on an NFC architecture (Single Wire Protocol – SWP) that they will control. Apple’s plans are firmly in the opposite direction, and a brilliant business move. Giving carriers the control over this utility would be akin to letting them run an app store that they control.

Apple may be running much faster than anyone in the industry knows toward this vision. Perhaps they have already indigenously created this new combined secure element/UICC/BT Radio. Although I see no need for them to run with this early… But if they did create this capability in the iPhone 5 they will certainly have the control to govern how it is used.

What does this means for investors? Perhaps you start by asking Vivotech’s .. as they just folded up shop after 12 years. A fantastic team with a rock solid product line.. their fault? Betting  NFC would take off sooner.  Given Apple’s unique ability to capture mobile ecosystem profits it is always tough to find areas to nibble.  On the software side, how can new companies help Apple orchestrate value propositions in the physical world? Retail? Ticketing? Healthcare?.. The times.. they are a changin…

Apple Passbook: No NFC Here…

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I’ve covered this topic quite a few times

As most of us have known Apple has been out of the NFC game for some time (18mo+). It’s just amazing that the mainstream press can be so caught up in a disinformation hype cycle that seemed to have been started by some kind of patent application. Yesterday’s WSJ had a fantastic article on Apple’s plans.

What makes for a “successful” consumer wallet? From previous post:

Customer Trust, Customer Control, Convenience, Ubiquity (opposite of lock in), Intuitiveness, Experience in Use (buying, redeeming, accessing, ..), Security,

If I have a wallet that only accepts 3 cards that are not accepted at any of the top 20 retailers (ie ISIS), it is of little value. Why not let consumers control what goes in? This is where carriers must get to in order for NFC to survive. Even then, NFC phones are far from my recommendation. After all if your payment information is locked in a mobile phone how do you use it when you are at your computer buying something on Amazon? Locking information in a phone is just plain stupid in the age of the cloud.. most agree that individuals should have a their information in a cloud they control. The NFC zealots reading this blog will respond that it NFC doesn’t require a network and is more reliable… my response, the POS and payment terminals are connected.. NFC doesn’t need to hold the card in the SE.. it just needs some sort of identifier.. or in the Square cardcase example no NFC at all just your voice print. After all if there is no auth from the payment network.. the transaction will not happen.. so something is connected in 99%+ of card transactions.

I’m very impressed that Apple’s exec team has kept the iPhone away from NFC… strategy brilliance is an understatement. By expanding Apple’s ownership of Digital Goods (old blog here with financials) into mCommerce (ie physical goods bought via phone) and narrowly aligned Physical commerce (ex. Ticketing) they can maintain ownership of the entire consumer process.. from marketing, sales, purchase and “delivery”.

Apple’s unique ability to garner 75% of mobile handset profits is shifting from DESIGN to VALUE ORCHECTRATION (see blog). No one can orchestrate value in NFC (see 12 party mess).  What is truly ironic is that as the carriers spend hundreds of millions of dollars on NFC and their walled garden strategy to “force control”, Apple and Google will be further ahead in coordinating value in new networks. This value delivery outside of the mobile network will further cement carriers roles as dumb pipes (related blog).  This seems to support my hypothesis (often stated) that it is nearly impossible for legacy networks to adapt in delivering new value propositions.

The Directory Battle PART 1 – Battle of the Cloud

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11 May 2012

This week we had both Finnovate and CTIA going on, and behind the scenes the battle lines are being formed in a forthcoming “BATTLE OF THE CLOUD” wallet. I didn’t include wallet in the quote because Battle of the Cloud sounds so much more ominous. Perhaps I should take a page from George Lucas’ playbook and start with Chapter 4.

I’ve been talking about the directory battle for some time now (see Clearxchange post).  Who keeps the directory of consumer information? As I outlined in Digital Wallet Strategies: “ securing information AND giving Consumers the exclusive ability to control what is shared with whom is a challenge (beyond technology and trust). We thus have many limited “Wallets” that are constructed around specific purposes”.

This week we had Visa’s President tell the CTIA audience that Visa has moved beyond NFC to V.me (see my previous post on Visa Wallet). What is really going on? What is the battle of the cloud?

Square, Visa, Google, PayPal, Apple, Banks, … have recognized the absurdity of storing your payment instruments in multiple locations. All of us understand the online implications, Amazon’s One Click makes everything so easy for us when you don’t have to enter your payment and ship to information. (V.me is centered around this online experience). Paypal does the same thing on eBay, Apple on iTunes, Rakutan , …etc.   But what few understand is the implication for the physical payment world. This is what I was attempting to highlight with PayPal’s new plastic rolled out last week (see PayPal blog, and Target RedCard). If all of your payment information is stored in the cloud, then all that is needed at the POS is authentication of identity (see blog). Remember US  online commerce is $170B/yr, physical commerce is $2.37T (not including FS, Travel/Entertainment).

The implications for cloud based payment at the POS are significant because the entity which leads THE DIRECTORY will have a significant consumer advantage, and will therefore also lead the breakdown of existing networks and subsequent growth of new “specialized” entities. For example, I firmly believe new entities will develop that shift “payment” revenue from merchant borne interchange to incentives (new digital coupons).  Another example is Paypal’s ability to selectively assume settlement risk on some transactions as they route through low cost ACH, or even allow customers to use BillMeLater to selectively convert certain purchase to loans AFTER THE FACT.  In these 2 examples, traditional payments revenue will be significantly disrupted by: lower cost transactions, competitive credit terms (each purchase), and incentives tied to payment type.

But do consumers really want to store all of their information in one place? With one entity given the ability to see all of your spend? For an mCommerce transaction, there is nothing I hate more than having to type in my name, address and card number in that tiny little screen.  Most of these mCommerce solutions (like V.me) are little more than an “autofill” where the merchant checkout page leverages API integration to the cloud service to retrieve user information (see diagram here). If I’m on my phone, my carrier already knows who I am, so seems fairly logical for them to help me with the autofill. This is a reason I’m now a big fan of Payfone. I could also see why it makes sense for Apple and Google. But why Visa? Does it make any sense at all for Visa to hold my Amex card?  Oh.. let me cast a few more stones on ISIS/NFC.. that payment instrument that locked in your phone.. yeah it can’t be used for the online purchase. Perhaps someday someone will write a secure NFC mobile browser plug in to extract data from the SE.. but that opens up a whole new can of worms.

Today’s online merchants are getting a very small taste of the war as they are asked to integrate auto-fill plug ins (Paypal, V.me/CYBS, Payfone, Google, soon to be Apple). Merchants should get on board with all of them, as they do represent a tremendous improvement in customer experience, and you may be able to squeeze some free marketing/implementation money from each of them. However, the cloud battle at the physical POS is still a few years off, as existing card products have a substantial advantage in risk modeling/fraud. This is where Square is taking a lead, as it has the best consumer experience hands down. Low volume merchants really should assess whether they need a specialized POS system, as the parameters for selecting one have shifted from ISO/Processor/Cost/Acct Recon/Book Keeping to Sales, incentives and customer experience.

Battle starts in mCommerce/eCommerce

My guess on timing of V.me is driven by knowledge of Apple’s impending plans to “extend” its iTunes account to payment outside of the Apple ecosystem. Visa sees this network risk and is in an all out war to protect its network, by leveraging its CYBS asset online. The banks have worked on a directory concept for quite some time. The Clearing House (TCH) built a working system called UPICK to solve the problem of consumers giving their RTN/ACCT# out in the open.. assigning a virtual number to the account. A sort of “virtual account number” that could only be translated by TCH.  It never took off, because ACH fraud was low and banks were much more excited about having merchants accept cards as payment.

Retailers are not silent participants to this war.. their champions are Target, Tesco, Amazon, and Rakutan. I hope Amazon will finally dust the plans off of One Click expansion. Other retailers are also aligning to assess creation of shared cloud infrastructure.  Sorry I can’t comment more. Similarly MNOs are also in the cloud game, for example Payfone may be one of the best services in the market..

Who are the players in the Cloud [Payments] War?

The initial battle will be in mobile/online purchases.

  • Banks: V.me, Mastercard,
  • Platforms: Apple, Google, PayPal
  • Retailers: Amazon, Rakutan,
  • MNOs: Payfone, Boku, payforit, billtomobile, …

Most confusing is that there are few alliances.. it is many against many.

http://tomnoyes.wordpress.com/2011/10/26/apples-commerce-future-square/