iPhone 5 Release Begs Question: Is Apple 'Passbook' Better Than NFC?
The war with Apple is far from over. Even after the company's impressive media event in San Francisco Sept. 12 to debut the new iPhone 5, many of Apple's competitors are still secure they hold a major trump card in the battle: NFC. But do they really have an advantage?
NFC, or a near field communications chip, can communicate with scanners, and let consumers easily swipe and pay at cash registers. Everyone from Samsung, and HTC, to Google, and Nokia are currently running NFC chips in their devices.
This wasn't an oversight for Apple, though. Like usual, it's just another calculated gamble from the tech giant. For the time being, Apple's betting on its own app over NFC: "Passbook."
Passbook is an app that will put all your digital coupons, tickets and loyalty cards in one place, and potentially, be a way one day to use the iPhone as a digital wallet. There has been much talk in the past few years about turning phones into digital wallets -- letting people use their phones to surf the Internet, make calls and pay for lattes and muffins.
"Every opportunity I have to get in front of a client, it's the first thing I talk about," says David Reeves, vice president of the 22squared advertising agency. "This is huge. Apple doesn't do anything halfway. This is a tremendous opportunity to revolutionize the way we use our wallets."
The iPhone 5 is choosing Passbook over NFC, partly because many analysts, like Shaw Wu, an analyst at Sterne Agee, argue the technology just isn't there yet, and that the chip hogs too much battery power.
But Wu does expect Passbook to pave the way for mobile payments eventually. Apple just has to get a critical mass of consumers using it. At that point, Apple will be able to persuade retailers to modernize their payment equipment to work with the iPhone.
Visa, MasterCard, Starbucks, Google, Square, PayPal, Intuit and others have been working feverishly to make mobile payments a way of life, but the practice has yet catch on in the mainstream, because businesses are waiting for it to become more widespread.
Apple could come at it with strength of numbers, Wu says. It has sold nearly 250 million iPhones to date, and Piper Jaffray analyst Gene Munster expects nearly 200 million more iPhones to be sold by the end of 2013.
"Of the iPhone owners we surveyed, over half said they wanted to buy the new one," Munster says. "There's a huge pent-up demand for the new iPhone."
"With Passbook, you can scan your iPhone or iPod Touch to check in for a flight, get into a movie and redeem a coupon," Apple says on its website. "You can also see when your coupons expire, where your concert seats are, and the balance left on that all-important coffee bar card."
Cyriac Roeding has been working feverishly since then to adapt his Shopkick shopping rewards app for Passbook. And he has good company in movie ticket service Fandango, United Airlines, Target and Starbucks, all of which are touted on Apple's Web site as Passbook participants.
Shopkick, which has 3.7 million members, already works with retailers Macy's, Best Buy and Target to offer rewards to shoppers in-store -- but they have to have the Shopkick app open while shopping to find out about the rewards.
The difference with Passbook: The offers not only show up without the app being open, but they're sent your way before you even enter the store. The iPhone's GPS detects your location. That might raise privacy concerns for some shoppers or be a welcome benefit.
"This is a big leap forward in making apps more contextual and relevant," Roeding says. "They pop up when they should."
"Your mobile device will become your wallet. Whether it's in a few months, a year from now or longer, it's going to happen," Daniel Delshad developer of a new app, Loyaldash, says.
Worldwide mobile payment transactions will grow to $617 billion in 2016, from $171 billion in 2012, researcher Gartner says.
According to Wu, the long-range game plan for Apple is to have the smartphone do everything -- start the car, lock it, open the house and garage, turn on the air conditioner and heater -- and, of course, become the vehicle to pay for goods with a swift swipe of the phone.
So is Passbook really better than NFC? Yes and no. Plenty of phones out there offer NFC -- Google's Nexus S, HTC's Desire C -- but few if any are making use of the technology in the way that Apple seems to intend to develop its Passbook app. You could make a strong argument it beats whatever kind of NFC is currently available in other smartphones.
"(Passbook) is just the beginning," Delshad says.