Major League Baseball’s spring training is already well into its Grapefruit and Cactus league schedules, and Opening Day, the official start of the season, is just two weeks out. Following the spring training schedule is Apple Inc., which hurled a drop-off-the-table curve ball this week.
The next revision of the widely popular iPhone is due out this summer, but to the surprise of many bankers it will not contain a Near Field Communication chip which is needed for the device so it can be used for mobile credit card payments, the next big thing for mobile devices. The Apple news was reported by The Independent in the UK, which covered the news after speaking with unnamed sources at UK mobile operators. The iPad 2 also didn’t have the chip installed when it was rolled out at the end of last week, which further leads to speculation that Apple may go on its own.
Some feel that Apple simply didn’t bring its extensive Rolodex of customers to the playing field because there are some different thoughts on what the NFC standard should be. Many still expect Apple to march a mobile payment platform out to the mound in the future, but the company will forgo the NFC standards war for the time being.
Henry Helgeson, co-CEO of Merchant Warehouse sees Apple’s move from a different perspective.
“The technology itself would be fairly easy for Apple to develop,” Helgeson stated. “This is more of a problem with the potential business model. iTunes already process through Visa, MasterCard, Discover and Amex. They’re keyed transactions which are inherently more costly as interchange costs more on these. If they were to use iTunes as a base for payments to let consumers pay at retail, they’re costs would be significantly higher. Plus they would have to monitor risk and have a large customer support and chargeback group. “
In order for NFC to work properly, all the moving parts will need to come together and play nicely. The processing arm of the solution could be the most critical component.
“These devices are going to need some particular infrastructure to get the payment from the payment device into the merchant’s bank account,” said Helgeson. “We aren’t going to be able to reinvent the wheel here to be able to get these phones to work on their own independent platform. In other words, you go out and sign up for a merchant account, then you go out and sign up for your phone account, you get hardware for both, there’s different risk, there’s different underwriters, different funding sources. I see this as something the phone companies are going to have to work with us on to get this done.”