I have been analysing Apple Pay to determine if it’s likely to accelerate mobile payment in general and the use of NFC. FirstPartner have an explanation how Apple Pay Works and Penrillian explain how the market isn’t open yet.
The initial implementation is US only, supports only 1.5% of US merchants, relies on the unpopular Apple Passbook and will only work on newer devices containing NFC. Hence, in the short term it won’t be used by many people. More importantly, the implementation is currently closed in that it only allows NFC payments via Apple. It isn’t possible for third parties to use NFC to build more universal, ubiquitous payment solutions. While the essential building blocks for ‘universal’ NFC-based systems across Android/iOS will soon be in place, such systems are blocked by Apple’s strategies.
NFC isn’t just about payment. It can be used in security, authentication, stock control and a myriad of contextual triggering apps, many in the growing realm of the Internet of Things (IoT). All these possibilities of using NFC are closed on iOS for now. However, I suspect that as with apps, when initially Apple said there would be no native apps and only web apps, they will have to open things up. A universal payments system is too compelling and it’s incomprehensible that Apple will stay closed in this area for so little apparent gain. The Internet of Things needs NFC as well as Bluetooth LE (iBeacons). I believe Apple will see themselves under increasing pressure from many directions to open up the NFC APIs.
Update: Adam Cohen-Rose has pointed me to an interesting article by Clover that describes how the network-side token system was proposed/implemented by the payment networks (Mastercard, Visa). There’s no reason why this couldn’t be, and probably will be, implemented on say Android. This suggests a ‘universal’ system might be viable provided it uses a similar network-side token system.
Update: In an email to Cult of Mac, an Apple spokeswoman confirmed that NFC chip on the iPhone 6 and 6 Plus is only for use with Apple Pay. Like Touch ID on the iPhone 5s, Apple is keeping its NFC restricted from developers, at least for its first year.
Update: Mark Ranta asks Where’s the Beef? and hopes Apple Pay is just the first (baby) step.
Update: Teardown shows NFC chip is from NXP.
Update: Why Apple Pay Won’t Work.