Blog: With iOS 7 and AirDrop, Apple Moves to Kill NFC, Dominate Mobile Commerce

If you believe that Apple will support near field communications (NFC) on its next iPhone, it’s time to give up on that hope. At its June 10 World Wide Developers Conference in San Francisco, Apple announced iOS 7, a completely revamped version of the operating system for Apple’s mobile devices. At least three major themes in the company’s announcement scream that NFC is not in its near-term future.

• Apple continues to compete against top developers for mind share. If Apple’s 2012 attempt to kick Google Maps off the iPhone 5 didn’t convince you that Apple wants to control user mind share, then iRadio surely should. As with its Maps effort last year, Apple is embedding this live radio service directly into the iOS operating system to immediately deploy it to all of its users, capturing share currently controlled by other developers and maximizing its control over consumer mind share within the Apple experience. Apple clearly sees its base of 575 million affluent and highly engaged consumers as one of its most valuable assets. As advertisers have taught us, controlling mind share presents opportunities for demand creation. Apple wants to extend its demand-creation business.
• Apple’s demand-creation aspirations go beyond advertising. A digital advertiser creates a destination of consumer interest and allows third parties to place ads within that destination to create demand and redirect consumers. An online marketplace takes this idea further, creating a destination of consumer interest and allowing third parties to sell products to consumers within that destination. The iPhone, iPad, and iPod are component parts of a marketplace made complete with iTunes—the online destination that pulls consumers and mobile content providers together to transact under the Apple umbrella. Apple hosts one of the most successful online marketplaces in the world, and there is no reason to assume that it won’t seek to extend this business model.
• Apple has launched a new technology to control mind share through sharing. Embedded within iOS 7 is AirDrop, a service that enables users to share photos, business cards, status updates, Apple Passbook passes, and other types of information while wrapped completely in an Apple experience. By embedding this capability into the operating system and by locking out other technologies that make sharing easy and efficient, Apple can own the sharing experience from start to finish, and it hopes to become the de facto sharing service for any application offered on iOS devices. Sharing is also the end of the shopping process. To complete a purchase, after all, one shares information—in this case, payment information.

From this, we can draw the following conclusions:

1. The strategies outlined above are the foundation of a mobile commerce network. Controlling consumer mind share from the point of demand creation to the point of purchase is equivalent to an online marketplace. Done in the e-commerce world, it is generally confined to an individual Website; done in a mobile environment, it’s an online marketplace that you can carry with you. The mobile commerce network is an online marketplace that transcends location, and it is what Apple is building.
2. It’s only a matter of time until AirDrop includes payments. Payment is an inevitable requirement of a mobile commerce network—consider that the initial launch of AirDrop will include the ability to share Passbook passes as well as a developer API so developers and businesses can receive Passbook passes and other information from AirDrop. This clearly sets the stage for coupon and offer exchanges via AirDrop for P2P and C2B sharing. Where there are coupon and offer exchanges, there will be payment exchanges, and a payment exchange is merely one other set of data to be added to AirDrop.
3. When AirDrop embraces payments, it will include in-person transactions. Apple made only passing mention of iBeacons, a new Bluetooth capability built into iOS 7 that can identify a mobile user’s location within a microradius. But this level of geolocation capabilities is exactly what Apple needs to extend AirDrop sharing to POS locations, providing the ability to match a consumer and his/her mobile device to a specific checkout activity and enabling transactions without tapping phones or scanning bar codes.

If AirDrop can achieve dominance as a sharing technology, Apple will suddenly control a marketplace of 575 million enrolled users. Apple will be monitoring consumer adoption of AirDrop closely, and when the time is right, it will open the AirDrop API to POS developers and incorporate the ability to AirDrop payments from the iTunes Wallet to location-based merchants. Why, exactly, would it want NFC solutions competing with this effort?

By Rick Oglesby, senior analyst with Boston-based consultancy Aite Group, focusing on mobile payments, mobile commerce, e-commerce, commercial card issuing and merchant acquiring as it relates to the mobile channel.