5 Common Questions About Apple Pay's Use of NFC

Posted by Joe Musitano on Oct 28, 2014 12:28:15 PM

Apple Pay and NFC TechnologyWith the release of Apple Pay last week, every news resource seems to be talking it up, raising questions about the underlying technology that makes Apple Pay possible. Here are a few common questions that people are asking, and why it may just revolutionize the mobile payment industry:

  1. What is NFC Technology?

    It stands for “Near FieldCommunications.” It’s simple to understand. NFC is a short-range, low-power wireless technology just like Bluetooth. It uses radio frequency and transfers minuscule amounts of data between devices you hold just a few inches apart. Currently, what it does is uniquely identify you and your bank account to a merchant’s computer. Smartphone owners can also create peer-to-peer radio communications and easily pass data from one smartphone to another.
  2. Doesn’t Bluetooth Already Do The Same Thing as NFC?

    Yes, but the big benefit of NFC Technology is that it uses much less power than Bluetooth. That’s why it’s such a huge deal – because it makes life so much easier for smartphone owners accustomed to short battery lives. Credit card companies are cautiously optimistic about this new technology.
  3. Who is Using NFC?

    Although it’s not been widely adopted by consumers and businesses yet, NFC is on the iPhone 6. And Apple is so popular and powerful with its customer base that they may create enough demand for businesses nationwide to start taking Apple Pay. A big incentive for using Apple Pay is that it does not charge merchants any fees (although it charges payment issuers like banks .15% to guarantee transaction information is tokenized and biometrically verified). This is more than Visa and Mastercard receive for their largest revenue stream – Dues and Assessments. If it can make mobile payments standard (and secure) at every business, you can see why this NFC technology is such a big deal, right?
  4. What Does NFC Mean to My Business & Credit Card Companies?

    Interestingly, this article claims Mastercard did its own research and found consumers spend 30% more when using contactless payment technology. That same article says that 30% translates into about $600 per month in additional spend among the highest spending segment. The belief that consumer’s ability to pay down their credit card debt doesn’t scale the same. So that leaves more unpaid debt for credit card companies to profit from. Plus, it makes up for any fees they may have to pay Apple.
  5. What’s the Future of NFC?

    The thing with this technology is, that if it does catch on, what would stop Apple from just processing payments itself? It’s very hard to say at the moment. You might be able to control devices around your home, like your lights and heat. You could easily swap personal contact information with others. It could even act as your personal identification as you travel. For now, though, let’s see if it revolutionizes the mobile payments industry. With Apple at the helm, there’s a good chance of this happening. But let’s be real. What’s likely to happen is that Apple collects its 0.15% in perpetuity. And never has to compete head to head with the card issuers!!!

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Topics: Apple Pay, NFC

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