With the arrival of the iPhone 5, a necessary piece of the mobile payments puzzle may snap into place. Apple is expected to include near-field communication (NFC) technology in the smartphone, just as Samsung has included it in its Galaxy S III and other new devices, and Motorola and Nokia included it in the smartphones each introduced last week.
With the technology in the hands of millions of Apple fans-in a device forecast to instigate the "biggest handset launch in history," as Jefferies analysts have written -- the mobile-payments market may get the nudge it needs to really take off.
"The United States is behind other developed regions in this infrastructure. It's a matter of standards. The Japanese railway standardized on Mobile FeliCa (owned by a consortium of Japanese companies), and everybody uses it. In Europe, they went a different way, dividing up among regional carriers. Over here, we're still arguing about it. Conflicting stakeholders, and all that," explained Roger Kay, principal analyst with Endpoint Technologies.
"So, the situation is ripe for someone to come in and make the whole transaction seamless," Kay said. "That's a tall order, and one reason it hasn't been done until now. However, it's right in line with what Apple does ... and if it does, Tim Cook would get a credit to his name as being able to carry on the mantel of Steve Jobs, disruptions and all."
Mung Ki Woo, senior vice president and group executive of mobile for MasterCard, said an NFC-enabled iPhone will help matters but that the lack of one hasn't necessarily slowed things down. Several steps have been required to move forward.
"People have [gradually] gotten used to the idea that their phones will be used for many purposes," Woo told eWEEK. "So you have the combination of people's maturity with their smartphones, that they're getting comfortable and buying more over the Internet, and now the next group of phones [that come out] will have NFC."
On Aug. 28, MasterCard and Everything Everywhere, the largest mobile operator in the United Kingdom, announced an exclusive, five-year deal in which they'll together develop mobile-payment solutions for the carrier's 27 million subscribers.
The pair said in a statement that the deal will help to accelerate the adoption of mobile-payment solutions. One of the first products they'll offer will be an NFC-based, co-branded prepaid solution that subscribers will be able to use at more than 100,000 U.K. retailers.
"As the use of cash continues to decline, we will be able to provide Everything Everywhere's ... customers with an attractive range of new payment services backed by the processing power and security of MasterCard," Marion King, president of MasterCard in the U.K. and Ireland, said in the statement.
Eventually, MasterCard and Everything Everywhere will expand their offerings to include person-to-person money transfers, loyalty rewards and digital-payment services that will offer an experience similar to shopping online.
Juniper Research said in an August report that it expects mobile-payment transactions to increase by nearly fourfold over the next five years, to move than $1.3 trillion.
"While we are now seeing significant deployments of contactless infrastructure, consumer awareness is extremely low," Juniper analyst Windsor Holden said in an Aug. 15 report. "Thus, it is imperative for all members of the NFC value chain to engage with the public to heighten its profile as a simple, intuitive payment mechanism.
Apple certainly has a way of increasing consumer awareness of new technologies and of directing new behaviors. But for now, competitor Google, with its Wallet app, has been among the brands doing their parts. Juniper's Holden wrote that Wallet and Isis-a joint venture between AT&T, Verizon Wireless and T-Mobile that's only beginning to be rolled out-mark a "tipping point" for mobile payments.
As of late August, 18 devices were certified for use with MasterCard's Mobile PayPass technology: the BlackBerry Bold 9900/9790 and BlackBerry Curve 9360/9380; the Google Nexus S; the HTC One X; the LG Viper 4G LTE; the LG Optimus Elite; the Nokia 603 and Nokia Lumia 610 NFC; the Samsung Wave Y, Galaxy mini 2, Galaxy S Advance and Galaxy Nexus; and the Sony Xperia, Xperia P and Xperia sola.
MasterCard's Woo notes that two complementary phenomena have been taking place, encouraging mobile payments-purchases of smartphones with NFC in developed countries and, in emerging countries such as Kenya, people without access to bank accounts using their phones as a payment system. The exception is Japan, where mobile payments have been a norm for several years.
Apple and others could benefit from the lessons learned in this early market.
"What is important is that the service has to be richer than the equivalent of a plastic card," Woo said, explaining MasterCard's main takeaway from Japan. "That sounds so natural, but sometimes we forget that we have to make it much richer. Smartphones enable people to do more, so they want [the payment experience] to also be more than they get from a piece of plastic."