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Is Apple planning incompatible payments?

Cupertino may go own-brand on NFC

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The Independent newspaper has been talking to network operators, and concluded that Apple is planning its own version of NFC for 2012.

Sources at "several UK operators" apparently told the paper that Apple is not planning to add Near Field Communication technology to the next iPhone, despite Google dropping NFC into the Nexus S last year. Even more surprisingly, the sources revealed that when Cupertino does sign up to proximity payments, it will do so with its own standard and ecosystem – prompting fears of incompatible networks and customer confusion.

The sources who tipped off the Indy cite the lack of agreed standard as the motivation behind Apple's decision to go it alone, but that makes no sense when NFC is so well established. We'd venture to guess that it is Apple's payment ecosystem that it intends to make proprietary, rather than the radio stack.

Near Field Communications can be used for a great deal more than making payments, though it is proximity payments that has the greatest revenue-generating potential. But enabling mobile payments requires a lot more than just radio: it also needs a back-end processing system and a connection to the banks, and it is here that Apple is likely planning its own solution.

That would mean not adopting Orange Cash, or O2 Money, and probably not the US-based consortium ISIS either, but that is no great surprise. Apple will process payments through iTunes, and make agreements with Visa or Mastercard to have Apple payments accepted by the existing NFC terminals. The question, therefore, is not if Apple will launch a proprietary payment system, but if it will allow competing systems to be installed.

A phone such as the Android-based Nexus S can host multiple payment mechanisms, on the embedded secure element, or the SIM. The latter falls under the control of the operator, the former is managed by Google. Payment systems that wish to be installed on the Nexus S need to ask the permission of Google, or the operator, and both parties have said they will be happy to accommodate multiple systems. Apple has a history of insisting that its own solution is the only one necessary, and so could decide to be exclusive.

That does simplify things – no one is quite sure how you decide which payment system to use when several are installed. Apple could argue that putting all your payments through Apple makes more sense, at least until the regulators get involved.

Regulators could, and probably would, insist on Apple opening up its platform eventually, but that can be done after the launch without difficulty. Most likely Apple hasn't yet decided if it will permit competitors onto its hardware, and is waiting to see how the market develops. It seems likely that this is the "lack of standard" to which The Independent's sources refer. That could also mean that Apple won't be bothering with NFC until 2012, and it would have to play catch-up – but Apple is very good at catching up.

So network operators have been approaching Apple to ask if they will be able to install Orange Cash, O2 Money and their ilk onto the next iPhone, and Apple is telling them that it won't be until 2012, and even then they probably won't be allowed on board... which is bad news for those interested in NFC, but probably good news for Apple and its customers. ®

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