Private equity firm Apollo Global Management will take Rackspace private in the all-cash deal.
Rumors swirl that consumers will be able to wave the next iPhone to pay.
Several reports and at least one industry expert say Apple is working on adding NFC mobile payment capabilities to the forthcoming iPhone 5. NFC, which stands for Near Field Communication, is a technology that enables phones (or other items, such as credit cards) to interact with objects—such as posters and payment terminals—over a distance of a few inches.
Apple Inc.’s iOS wouldn’t be the first smartphone operating system with NFC technology. The newest version of Google Inc.’s Android mobile operating system, Gingerbread, is equipped with NFC. Google, however, has not touted payments with NFC in Gingerbread, instead focusing how the technology could be used to interact with items such as stickers, movie posters and t-shirts. For instance, a consumer could wave her phone near a movie sticker with an embedded NFC chip to see a schedule of upcoming showings or to download a discount coupon.
David Eads, director of product marketing for mobile app platform developer Kony Solutions says Apple would have a distinct advantage over Google for NFC payments because Apple already has payment information for some 160 million consumers who have used their mobile devices to purchase from Apple’s App Store and from the iTunes Store.
“I fully expect the iPhone 5 to have payment capabilities,” Eads says. “And Apple has the ability to jump ahead of Gingerbread for payments with all the payment data they have.”
While Apple would have two pieces of the puzzle to get the ball rolling: NFC technology and payment information for many consumers, merchants would have to invest in upgrading their terminals to accept NFC payments, Eads says. That’s something a critical mass of merchants has not been willing to do despite contactless payment technology related to NFC being available in payment cards for several years. Merchants have taken a wait-and-see attitude to pay-with-a-wave technology partly because banks haven’t issued such cards in large numbers as they are much more expensive to produce than magnetic-stripe cards and partly because consumers haven’t shown great interest in the technology.
“I think there are about 750,000 contactless terminals out there today,” Eads says. “You haven’t seen more investment because the phones haven’t been there yet.” However if consumers can use the smartphone they already have, and the payment data they have saved with Apple, they might change their behavior.
If Apple does offer the technology, it will be in a prime position to take a chunk of the interchange fees from the roughly $2.5 trillion in annual credit card transactions worldwide, according to American Bankers Association. Typically merchants pay 1% to 3% in interchange fees to card companies to accept credit cards. However, if Apple does offer NFC payments with the new iPhone, it will likely want a share of that revenue for developing the technology that promotes the use of mobile phone-based card payments, Eads says. “My guess is that Apple will want 30% of that,” he says. “They’ll say ‘Look we are bringing you all this so we deserve a cut.’”
Eads says the fight for a piece of NFC mobile payments has been heating up in the past year as NFC standards have matured. Companies like Vivotech, a supplier of NFC-equipped payment terminals have been working for a decade to push through common NFC payment standards, he says.
“The actual NFC standards, like how will the chip talk to the reader and will this work in Canada or Australia, were just worked out in the past six months to a year,” Eads says. “Now you are going to see this whole arms race and wave of innovation with NFC from Apple, Google, the wireless carriers and even retailers themselves.”
Further evidence that NFC mobile payments are heating up is Isis, a mobile payments program launched in November that uses NFC technology to enable shoppers to pay with their phones in stores. It’s backed by AT&T Mobility, T-Mobile USA and Verizon Wireless which collectively provide wireless services to more than 200 million U.S. consumers.
Apple did not respond to a request to comment.