Morgan Stanley predicts Apple will incorporate NFC into future iPhone for mobile payments

Posted:
in iPhone edited May 2014
While prognosticators have given failed forecasts for years predicting Apple will add near-field communications technology to the iPhone for touch-less mobile payments, investment firm Morgan Stanley offered the same prediction on Tuesday, suggesting that NFC will be a key part of the company's so-called "iWallet."

Touch ID


While competing smartphones have shipped with NFC chips for years, tapping into services like Google Wallet, mobile payments have yet to take off with consumers. In a rare candid comment about potential future plans, Apple Chief Executive Tim Cook hinted that his company could join the fray and enter the mobile payments space by leveraging the secure Touch ID fingerprint scanner found on the iPhone 5s to authenticate transactions.

What the iPhone 5s doesn't have, however, is an NFC chip. To date, Apple's close-proximity wireless efforts have relied on a combination of Wi-Fi and Bluetooth, most notably with the location-aware iBeacon specification that debuted last year and is now used by numerous retail outlets, including Apple's own stores.

Still, Morgan Stanley believes Apple will go one step further and incorporate an NFC chip into its future devices, making the technology a "core part of its mobile payments strategy." Analyst Craig Hettenbach said in a note to investors Tuesday, a copy of which was provided to AppleInsider, that he believes NFC is reaching an "inflection point," thanks to new partnerships, potential licenses, and patent filings, including those from Apple.

In addition to patent filings from Apple describing the use of NFC, Wi-Fi and Bluetooth for mobile payments, Hettenbach also noted that Apple's new retail point-of-sale systems from VeriFone place the iPhone 5s in a case that not only allows traditional credit-card swipes, but also utilizes NFC tap-to-pay technology with compatible smartphones. To date, Apple's own iPhones have not yet offered this capability.

Hettenbach also cited a report from earlier this month that alleged Apple had reached an agreement with China UnionPay, a Chinese interbank network. The two companies were said to be working together on NFC payments, suggesting the technology might come to a future iPhone.

Payment
An Apple patent describing e-wallet NFC payments was discovered by AppleInsider in January.


If Apple does in fact adopt NFC technology, Hettenbach expects the company will go with a standalone NFC controller for its future iPhones. His industry sources indicated that most NFC implementations in smartphones in the near future will utilize standalone chips, as combo chips from companies like Broadcom apparently face technical issues at the moment.

Apple would also have to choose whether to go with an embedded implementation for credit card data in mobile payments, or a cloud-based approach that would utilize host card implementation. An embedded secure element would ensure that the user's credit card data is held securely on the iPhone, but Hettenbach said host card emulation would allow Apple to circumvent carriers, who in the past have blocked mobile payment features like Google Wallet on Android phones.

Given Apple's focus on security, Hettenbach suspects Apple will go with the embedded route, relying on a stacked NFC radio and embedded secure element solution. And given its large user bace and clout with carriers due to iPhone sales, he believes Apple might be able to bypass the carrier "logjam" and gain approval for its mobile payments system.

Claims that Apple might adopt NFC e-wallet technology in a future iPhone are not new. The New York Times claimed back in March of 2011 that Apple was planning to utilize NFC technology in a "coming" iPhone for mobile payments, but to date that functionality has not appeared.

Apple has also made key hires related to NFC and radio-frequency identification, but thus far the company has been content to stick with Bluetooth and Wi-Fi for its wireless connectivity.
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Comments

  • Reply 1 of 65
    williamhwilliamh Posts: 1,032member

    Given that we can already use iPhones for mobile payments, does the NFC chip add enough convenience to justify the expense, etc?  Can't Apple do well enough without it?

  • Reply 2 of 65
    negafoxnegafox Posts: 480member

    This year's rumors seem to be the same as last year: NFC, larger screen, higher resolution, etc. Keep recycling the same predictions until they either occur or supposedly scrapped due to some vague issues. I guarantee we will STILL hear chimes about iTV next year.

  • Reply 3 of 65
    icoco3icoco3 Posts: 1,474member

    They keep shooting in the same place in hopes that one day the target will cross their path and they can claim victory.

  • Reply 4 of 65
    johnodsjohnods Posts: 1member
    If you are a Morgan Stanley client, you seriously have to question why you are paying them.
    Apple will never support NFC, they have moved on to ibeacons.
  • Reply 5 of 65
    gprovidagprovida Posts: 258member
    Given the changes in market, e.g., US finally getting smart chips in credit cards and the associated infrastructure changes will have to play a big role in how this rolls out. The International dimension of smartphone payments, the rapid (albeit recent) adoption of iBeacon, and external constraints by carriers and credit card companies make doing this right very tricky.

    The Google Wallet et al strategy of "build it and they will come" is unlikely to get traction as recently demonstrated.

    Finally, what is the consumer job to be done that says use a smartphone to buy stuff?
    1. Don't need to carry credit card, probably not
    2. More secure, maybe but the smart chip card is pretty great improvement and is happening now. And does anyone really believe computer based payments is more secure????
    3. It's faster since you can buy stuff without a checkout counter and/or clerk. My experience with Apple app checkout in stores is positive, but this is the exception. Self service checkout in general sucks and is chosen for anonymity or desperation due to understaffed, read CHEAP, checkout staff.

    Therefore, the use case that will make this fly seems weak. This prob has more likelihood than Apple iTV, but still more hype than well thought out. Sort like the Internet banking fad of a few years ago.
  • Reply 6 of 65
    andysolandysol Posts: 2,506member
    NFC or no NFC- I don't care. I just want a mobile payment system of some sort. Make passbook actually functional for 99% of the population. Hopeful this is the year.
  • Reply 7 of 65
    eliangonzaleliangonzal Posts: 490member
    And if they don't: Apple isn't innovative; Apple falls behind...AGAIN; Steve Jobs would never have....
  • Reply 8 of 65
    Yet another big bag of hurt. Apple avoided it in the past when Steve Jobs was at the helm because it was unsafe, unreliable and not elegant. If Apple does come out with NFC, I blame it on 'the new boss'. There are much better technical solution that Tim Cook can marshal the troops to 'cook' up than that ugly bag of hurt.
  • Reply 9 of 65
    No Morgan Stanley, Apple will not use NFC, because NFC is crap technology. Perhaps you, Morgan Stanley, should catch up with the modern world and understand WHY RFC is crap technology.
  • Reply 10 of 65
    pmzpmz Posts: 3,433member
    Quote:

    Originally Posted by williamh View Post

     

    Given that we can already use iPhones for mobile payments, does the NFC chip add enough convenience to justify the expense, etc?  Can't Apple do well enough without it?


    They can do better, not just "well enough".

     

    These non-tech companies that perform the "analysis" of tech companies fall into the main trap that someone like Jonny Ive does not: You must throw out preconceived notions about what something is before trying to tackle a project. 

     

    Talking about NFC in the same breath as Mobile Payments is just a way to confine yourself to a limited scope of ideas.

  • Reply 11 of 65
    ericthehalfbeeericthehalfbee Posts: 4,485member
    No.

    By using NFC Apple limits those 600 million iTunes accounts with credit cards down to a fraction of users that actually have the latest device (iPhone 6). You can't start a payment system that only works with a limited number of users.

    BT Low Energy and iBeacons is where it's at.
  • Reply 12 of 65
    pmzpmz Posts: 3,433member
    Quote:

    Originally Posted by gprovida View Post



    US finally getting smart chips in credit cards

     

    What gave you the impression that this is a good thing?

  • Reply 13 of 65
    solipsismxsolipsismx Posts: 19,566member
    williamh wrote: »
    Given that we can already use iPhones for mobile payments, does the NFC chip add enough convenience to justify the expense, etc?  Can't Apple do well enough without it?

    NFC is about security. It's inherently different from BT and WiFi.

    No Morgan Stanley, Apple will not use NFC, because NFC is crap technology. Perhaps you, Morgan Stanley, should catch up with the modern world and understand WHY RFC is crap technology.

    No, no it's not crap technology.
  • Reply 14 of 65
    evilutionevilution Posts: 1,399member
    Quote:

    Originally Posted by AppleInsider View Post



    While competing smartphones have shipped with NFC chips for years

     

    From what I remember, "also ran" phone makers introduced NFC as the next big thing and Apple would be doomed if they didn't use it. Then the same companies stopped adding it as it didn't catch on (because Apple didn't implement it).

  • Reply 15 of 65
    ericthehalfbeeericthehalfbee Posts: 4,485member
    solipsismx wrote: »
    NFC is about security. It's inherently different from BT and WiFi.
    No, no it's not crap technology.
    Wrong as I described previously.

    There is absolutely no difference in security between NFC, WiFi, BT, your Internet connection or phone line (many stores still use phone lines to connect to the payment processor). They can ALL be snooped just as easily.

    NFC proponents point to the short distance of the signal as a means of providing security. This is 100% false. All it takes to snoop every single NFC transaction is a tiny antenna mounted on the back side of the POS terminal or even on its stand. If crooks want to record data they're going to be able to regardless of the technology.

    As I posted before, crooks in Vancouver actually modified POS terminals to record credit card transactions. Worrying about sending data over BT or WiFi is pointless when criminals will just go to the source (the terminal). It's far easier to slap an NFC receiver to a terminal than it is to modify a terminal, making NFC an easier target for organized crime than current methods.


    The way to secure your data isn't in trying to make the highway (BT, NFC, WiFi or Internet connection) more secure - it's in not transmitting sensitive or personal information in the first place. Which is why my idea of Apple becoming the processor and eliminating the broadcasting of personal information and credit cards is superior to the status quo current payment processors use.
  • Reply 16 of 65
    Quote:

    Originally Posted by pmz View Post

     

     

    What gave you the impression that this is a good thing?


     

    It's not the chip alone; it's chip-and-pin.

  • Reply 17 of 65
    solipsismxsolipsismx Posts: 19,566member
    Wrong as I described previously.

    There is absolutely no difference in security between NFC, WiFi, BT, your Internet connection or phone line (many stores still use phone lines to connect to the payment processor). They can ALL be snooped just as easily.

    That's axiomatically false, which you show in your quoted comment below.
    NFC proponents point to the short distance of the signal as a means of providing security. This is 100% false. All it takes to snoop every single NFC transaction is a tiny antenna mounted on the back side of the POS terminal or even on its stand. If crooks want to record data they're going to be able to regardless of the technology.

    So you need a special antenna mounted and directed at the exact spot where the NFC secure loop takes place. You don't see the difference between that and an omnidirectional signal that can be sent for dozen to thousands of feet from the source and be picked up people nowhere near where the transaction took place without any special equipment?

    What you describe is EXACTLY whey NFC is inherently more secure. Your comments are like saying that a bank vault is less secure than putting your savings in a paper bag in the back of your mailbox because all a thief has to do is rob the bank to get your money.

    No one has said that NFC is so secure that it can't hacked or that other security measures need to be in place, but a shorter range wireless signal, especially one that uses a secure loop, is inherently more secure than a longer range omnidirectional signal.
  • Reply 18 of 65
    clemynxclemynx Posts: 1,552member
    If that happens, I'll look like a fool for all the comments against NFC that I've done.
    The only advantage NFC has over BLE is that the beacons don't need electricity to work.

    BLE has a lot of advantages over NFC.

    I don't see Apple doing that.
  • Reply 19 of 65
    mjtomlinmjtomlin Posts: 2,673member
    Quote:
    Originally Posted by EricTheHalfBee View Post



    No.



    By using NFC Apple limits those 600 million iTunes accounts with credit cards down to a fraction of users that actually have the latest device (iPhone 6). You can't start a payment system that only works with a limited number of users.



    BT Low Energy and iBeacons is where it's at.

     

    You're forgetting the other piece of hardware in this puzzle... Touch ID... Still leaves only a fraction of their user base. And actually limiting access to new features like this is EXACTLY what Apple has always done. Start small and build it up. Siri, Touch ID, etc. I don't see why Apple would stray from this with something as sensitive as an e-wallet.

     

    A separate, highly secure NFC radio tied directly with Touch ID might be exactly what's needed to earn consumer trust. The radio is only turned on under two conditions: the device is waiting on a transaction (software) and the user's finger is on the Touch ID sensor (hardware) and has been authorized. Then and only then does the NFC radio turn on and being a transaction. This would help a lot to all the security issues surrounding NFC.

     

    Furthermore, this doesn't push iBeacon out. iBeacon is and was always meant to be a beacon technology for presence and guidance, it's not meant for making transactions, in fact it's not even capable of it. As it is today, iBeacons just picks up beacon signals, it doesn't react on them. It's up to the app to determine how to proceed once a beacon is heard.

  • Reply 20 of 65
    solipsismxsolipsismx Posts: 19,566member
    clemynx wrote: »
    BLE has a lot of advantages over NFC.

    These are not mutually exclusive technologies. BT is oft used alongside NFC the way BT is used with WiFi for AirDrop on iOS-based devices.

    mjtomlin wrote: »
    You're forgetting the other piece of hardware in this puzzle... Touch ID... Still leaves only a fraction of their user base. And actually limiting access to new features like this is EXACTLY what Apple has always done. Start small and build it up. Siri, Touch ID, etc. I don't see why Apple would stray from this with something as sensitive as an e-wallet.

    A separate, highly secure NFC radio tied directly with Touch ID might be exactly what's needed to earn consumer trust. The radio is only turned on under two conditions: the device is waiting on a transaction (software) and the user's finger is on the Touch ID sensor (hardware) and has been authorized. Then and only then does the NFC radio turn on and being a transaction. This would help a lot to all the security issues surrounding NFC.

    Imagine if Apple had it set up so that your credit card information was stored in the same location as your fingerprint data. And you could even attach a specific card with a specific finger. You could have several cards stored on your iPhone and just use a different finger to use whichever card at checkout.

    Don't forget the secure enclave on the A-series chip.
    Furthermore, this doesn't push iBeacon out. iBeacon is and was always meant to be a beacon technology for presence and guidance, it's not meant for making transactions, in fact it's not even capable of it. As it is today, iBeacons just picks up beacon signals, it doesn't react on them. It's up to the app to determine how to proceed once a beacon is heard.

    Because Apple wasn't first with NFC there seems to be this irrational hatred of the technology without considering how it can be utilized to better service customers. The funny thing is Apple is rarely the first to adopt a technology but often the first to do it properly.
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