Apple Picks an Alternative to NFC in New iPhone Software

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The developers who have an early look at Apple's new iOS7 operating system have found it supports the use of Bluetooth Low Energy (BLE), a wireless technology that some consider a longer-range alternative to Near Field Communication (NFC).

Apple's iBeacon uses BLE, which builds a beacon around a certain area so the app can be alerted when users enter, GigaOM reports. Apple's iBeacon has a large range, up to 50 meters, while NFC tags have a range of less than a third of a meter—meaning a retailer could deploy fewer iBeacons to cover a larger area of a store, the article says.

PayPal's new Beacon mobile payment system, unveiled this week, also uses a BLE signal. PayPal users must have the company's app already running on their phone for it to initiate a payment through Beacon when they enter a store.

Apple, which did not return a request for comment by deadline, has provided very few details about iBeacon. It has been more outspoken about other new iPhone technology that it can use for payments, such as the iCloud Keychain and fingerprint-based payments. Apple has never built an iPhone with an NFC chip.

"If Apple had chosen to include NFC that would have bolstered the NFC cause, but I wouldn't say this is denting NFC at this point because Apple is not offering a competitive payment solution yet," said Rick Oglesby, a senior analyst at Aite Group, who says Apple is setting up a direct head-to-head competition between Bluetooth/geofencing and NFC. "[Apple] has lots of NFC patents so they may still deploy NFC at some point, but at the moment, Bluetooth appears to be their method of choice and NFC appears to be a fallback plan at best."

By using BLE technology, a merchant can be instantly aware of a shopper's presence—enabling location-based coupons, promotions or other services.

"PayPal and Apple both appear to be embracing Bluetooth LE as an NFC competitor," Oglesby says.

PayPal is a more immediate threat to NFC, since its product includes payments from day one, he says.

"But the stage is clearly being set for Apple to make a move into payments as well," Oglesby says. "They are taking a more measured approach, launching services such as AirDrop [Apple's file sharing technology] and iBeacon, and if these solutions gain some significant traction then payments will be an inevitable addition, most likely via AirDrop."

Other mobile payments efforts, such as Isis and Google Wallet, are more committed to NFC, though PayPal and Apple's moves suggest an escalation in the battle between wireless technologies.

Technology issues aside, Apple may face margin challenges if it enters the payments business, says Jim Van Dyke, CEO of Javelin Strategy & Research.

"The only way for Apple to make money in payments is for them to embrace a low-cost payment processing capability, similar to what PayPal did when they started to get broader adoption. I'm referring to ACH capabilities," he says. "Everyone is leaving out the profit margin issue when they ponder Apple's potential for a foray into merchant payment enablement."

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